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Responsible use of a credit card is one of the best ways to build credit. Your credit score can be improved by maintaining a low balance and making your payments on time. However, if you already have bad credit, getting a credit card can be difficult.
Secured and unsecured credit cards are available to people with bad credit. However, some companies take advantage of consumers in need of credit by offering unfavorable terms and conditions.
The following are five things to avoid in a credit card for bad credit:
1. Unreasonable Fees
Credit cards with unreasonable or unusual fees often target people with bad credit. You should be wary of annual fees approaching $100, the same price you’d pay for a premium rewards credit card. Find a card with a low (or no) annual fee.
The fees don’t end there. Some credit card providers charge application fees, opening fees, and monthly maintenance fees just to use the card. Credit cards all charge fees, but beware of fees that seem excessive or tacked on.
2. Exorbitant Interest Rates
Credit determines how much interest you qualify for, and it’s no secret that people with bad credit will pay more. However, some credit cards charge extremely high interest rates, with annual percentage rates (APRs) exceeding 30%!
An exorbitant interest rate will cost you dearly if you tend to carry a balance from month to month (it is best to pay off your balance in full every month). You should shop around for the best interest rate before you submit your application.
3. Lack of Visibility
When you have bad credit, you need to watch your finances closely. You can monitor your credit card activity and avoid mistakes if your credit card provides detailed statements, online account access, and other insights. Some credit cards even provide insight into your credit score.
When you don’t have visibility into your account, you are more likely to make financial mistakes, such as maxing out your credit card. Look for a card that offers plenty of account management tools.
4. Incomplete Credit Reporting
For a credit card to build credit fully, your account activity must be reported to all three credit bureaus: Experian, TransUnion, and Equifax. In case the credit card company does not report to all three bureaus, you should keep searching for one that does.
5. Poor Customer Service
Most credit card providers allow you to submit an application for their products online, but you may want to call the company if you have questions about their cards. Get information and gain an impression of the company’s customer service by calling. Was the wait time long? How knowledgeable and helpful were the representatives?
If not, you might want to consider a company that offers better customer service. Do some research online and read some reviews before choosing a credit card provider.
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