If your credit rating has been impacted by the economic slump, you’ve probably seen your mailbox getting stuffed with those offers for ‘bad credit instant approval credit cards’ almost every day. You’re certainly not alone – tens of millions of Americans have fallen victim to the vagaries of this declining economy, resulting in a once good or decent credit rating dwindling down to a poor rating. There are a myriad of reasons; perhaps you’ve been laid off, had a reduction in work hours or pay, experienced costly health problems or simply can’t keep up with spiraling food costs. Just a few missed payments can send your credit rating way south in a hurry. You may think, “Desperate times call for desperate measures”, which makes you easy prey for those cleverly written ‘offers’ for bad credit instant approval credit cards. Along with the ‘advance payday’ loans, these types of offers should go straight from your mailbox into the round file. Here’s why.
Think about how, several years ago, the banking industry lured millions upon millions of Americans into mortgage loans they really couldn’t afford, encouraged by brokers and lenders to ‘fudge’ on the data on their loan applications, either inflating their real income, or convincing them to accept some of the more creative financing packages, such as the ARMs. Today, we see the disastrous results: foreclosures on these loans are at a record high. This is quite similar in nature to those solicitations for bad credit, instant approval’ credit cards you now find burgeoning in your mailbox. Let’s take a closer look at this latest banker’s ploy.
The friendly, clever copy of the cover letter is designed to make you believe that taking them up on this offer may help you out of a tight spot. Nothing could be further from the truth. When you examine the fine print, you’ll see that the APR is outrageous. Should you miss a payment, even by a day, that already hefty APR automatically goes up and you’ll be assessed a substantial fine – think $75 or more! There have been many documented cases of lenders, receiving a timely payment and then deferring processing the payment for a day or two, just so they can raise your APR and assess you that substantial fine. Keep in mind that only one incident like this can then eat up the rest of your credit line!
Probably the key phrase in these so-called offers for bad credit, instant approval credit cards is ‘instant approval’. You already know you’ve got bad credit and are desperately looking for an immediate solution. Legitimate ‘instant approval’ credit card offers are approved only for those with an authentically near-pristine credit record.
If you’ve got bad credit, you need to work your way out of it the ‘old fashioned’ way. Sharpen your pencil and give your budget a good amount of scrutiny. Cut all unnecessary spending. If you have one or more small debts, squeeze your budget and pay them off, one by one. Try to make at least the minimum payment on existing credit cards. Consult with a non-profit debt consolidation organization to see if you can’t consolidate your current debt and reduce your total monthly payments. The moral to this story? Avoid those bad credit instant approval credit cards like the plague! Good luck!
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Oh, are there still any people out there with an excellent credit rating? Yes, there are, but the majority of the consuming public has at least a few dings in their credit rating. If you’ve got bad credit, you’ve still got credit possibilities. Those bankers are so creative! However, secured credit cards for bad credit gives you a chance to start rebuilding your credit rating. Everyone needs to use credit at some point, if only for the convenience. You don’t have to carry large amounts of cash while shopping, or hope a vendor will accept an out of town/area check. If you pay the credit card off each month, the interest is kept to a minimum and your credit rating improves, month by month.
Secured credit cards for bad credit risks are designed to keep you on the straight and narrow as you rebuild a good credit rating. Yes, it will cost you in terms of interest, but not so much as to make this proposition a bad deal. Here’s how it works: you apply for the secured credit card and deposit any amount you wish – that amount becomes your line of credit. Think of it as a savings account from which you can only withdraw by paying interest. You can get cash advances and use the card at any retailer that accepts credit cards. There’s no ‘scarlet letter’ emblazoned on the card, marking you as having bad credit. In other words, secured credit cards for bad credit work and look just like any other credit card, with the exception that it’s not the bank’s money you’re using? It’s your own money!
With that caveat, you need to understand that there’s no wiggle room when it comes to going over your limit. Keep close track of your purchases and remaining funds. If you try to exceed your limit, the transaction will be declined and you’ll be penalized with an immediate rise of your APR, which, with secured credit cards for bad credit, are typically healthy enough without you making it worse! Keep in mind, too, that you really don’t want to spend all of your money on a shopping spree. Be prudent and reserve some of those funds for emergency use. Although cash advances cost you, it may be a better strategy to take a cash advance amount against the possibility of an emergency situation and use your remaining funds for everyday purchases, such as gas for your car, kid’s school clothes and the like. For the maximum beneficial financial effect, you want to approach the maximum amount on your secured credit card, without going over! If you breeze through the month with no emergency money requirement, use the cash to help pay off the balance on your monthly statement. You then start fresh with a new month of full credit.
Most secured credit cards for bad credit come with the proviso that responsible use will generate a review of your ‘credit line’ within 3-6 months. The issuing company may raise your limit, with no additional deposit required. If you’ve been judicious and prudent in using your card, you might ask if you can get a reduction in your APR as well.
Naturally, the card issuer is in business to make money, but they also want long-term good customers. Typically, after a year of timely payments and no over-the-limit transactions, the card issuer will give you a true line of credit, with a higher limit.
So now you see how to make the best use of secured credit cards for bad credit. All you have to do is be responsible and patient. Good luck!
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