An unsecured credit card is essentially just that a credit card that is not secured by any form of collateral. This article provides a basic guide to those looking to apply for a credit card of this type, as well as discussing what factors people should take into consideration before applying.
Credit cards have been in the media spotlight a huge amount over the past couple of years, as bad credit card debt is heavily linked to the current global financial crisis. Credit cards, however, are not all bad, and when used in an appropriate manner can have many uses and benefits.
The main advantage of credit cards is that they can be used to pay for goods and services all over the world. Nearly every card bears either the MasterCard or Visa logo, so these cards can be used anywhere that accepts this form of payment, including online and mail order businesses.
After receiving their new unsecured credit card the new customer will be assigned a credit limit. A credit limit is the maximum amount of money that the person can owe to the card company. This can vary from a couple of hundred dollars to several thousands, and will be linked to the customer’s credit score and their ability to repay debt.
Every month the cardholder will receive an account statement, either online or in paper form. This will detail the current balance on the card, as well as the minimum amount that needs to be paid off that month on or before a designated due date.
The account holder can then elect to either pay the balance of in full, or make a partial payment. The partial payment can be for any amount, as long as it is above the minimum payment. Paying the balance in full means that no interest is charged, and the balance of the card returns to zero, ready to be used again.
Not meeting monthly deadlines will result in extra charges for late payments and missed payments, will adversely affect your credit score, and will leave a black mark on your credit history. Doing this on a regular basis can even see you end up in court, so only apply for an unsecured credit card if you are confident in your ability to repay the debt.
If the customer pays a partial amount they will be charged interest on the remainder. The amount of interest charged can be worked out by looking at the card’s APR (annual percentage rate of interest) figure. This can vary immensely, from around 6% APR to above 40%. The higher the figure, the more interest charged every month.
For this reason, looking for cards with lower rates of APR should be a high priority when choosing unsecured credit cards. Other factors to consider are whether the credit company charges an annual or monthly maintenance fee, and whether you can improve your credit score through good financial behavior.
This should only be regarded as a basic guide to unsecured credit cards, but will hopefully serve as a useful introduction to what credit cards are all about. When handled in the correct manner they can become extremely useful financial tools to aid us in our everyday lives.
How to apply for a credit card if you have bad credit in 4 simple steps https://cardsmix.com/bad-credit-cards
How to apply for a credit card with bad credit?
Step 1: How Bad Is Your Credit?
Check your credit score through Discover Bank, Capital One Credit Wise, Credit Karma or another free credit score service.
You can also get a full credit report for free once a year at annualcreditreport.com.
Step 2: Decide on a Secured or Unsecured Card Option
The primary difference between the two, is that secured cards require security deposits of at least 0, that the card issuer holds in case you default on the account.
Action 1: Try an unsecured card first. Cards with prequalification are a good option. If you are approved – great!
Action 2: If you are not approved, apply for a secured credit card. Now use your card, make your payments on time, build your credit score, and work toward improving your score to graduate to an unsecured card in the near future.
Action 3: If you are not approved for a secured credit card, your only option is to use a prepaid card. Prepaid card won’t help you improve your credit, so it’s important that you work on getting a secured credit card and improving your credit.
Step 3: Use Your Credit Responsibly and Rebuild Your Credit
Monitor your score. [make sure you continuously monitor your score to see where you need to improve or make corrections.]
Keep your utilization low. [keep your total amount due at 30% or below your total available credit, do not max out your credit line]
Pay on time. [Making timely payments is one of the most important parts of a good credit score.]
Ask for credit line increases. [Ask your card issuer if this is an option. Also, don’t be afraid to ask when and if graduating to an unsecured credit card.]
Step 4: Get a Card for Average or Fair Credit
In about 12 months your credit should be in 650 FICO range and will be ready to get a credit card for fair credit with higher limits and better terms.
More info: https://cardsmix.com/bad-credit-cards
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