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Article Title: Bad Credit Cards - 5 Little Known Facts You Should Know About
Author: Bobby Tan
Category: Banking, Credit, Personal Finance
Word Count: 739
Keywords: bad credit card, bad credit cards, secured credit card
Author's Email Address: [email protected]
Article Source: http://www.articlemarketer.com
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If you're suffering from bad credit, you probably won't have as many credit
card choices as someone with good credit. But that doesn't mean you shouldn't
be prudent and examine your options carefully before selecting a card designed
for bad credit. Not all bad credit cards are the same! The terms and interest
charges can vary greatly so be sure you do your homework before applying. It
can literally save you hundreds of dollars each year.
Among the credit cards available for people with poor credit, a secured credit
card is one of the best options. In order to qualify for a secured credit card,
all you need to do is deposit money in a blocked bank account to guarantee the
line of credit. Your credit limit is equal to the amount you deposit.
As you comparison shop for a card, keep in mind that if you make it a habit to
pay off your balance in full each month, you'll benefit more from selecting one
with no annual fee and a longer grace period. If you tend to carry a monthly
balance, you're better selecting a card with the lowest annual percentage rate.
In order to evaluate the features of each secured credit card, you'll need to
see their disclosure of terms and conditions form. If you're doing this online,
click forward until you find it and review it carefully. Carefully compare the
disclosure of each card and study the following:
1) Interest Rates
This is the amount of interest you will pay each year. With a history of poor
credit, your yearly interest rate can jump as high as 32 percent, although each
state can set a legal maximum. Banks can choose to calculate the balance over a
one or two month cycle and can choose to include or exclude your current
purchases from the balance. There are three primary ways to calculate the
balance:
A) Adjusted Balance
The bank takes the balance you owe less any payments and then applies the
finance charge. Current purchases are not added to the balance until next
month. This method results in the least amount of charges.
B) Previous Balance
The bank calculates the finance charge on the balance at the beginning of the
month without including any payments.
C) Average Daily Balance
The bank adds the total of each days balance during the billing cycle and
divides by the total number of days in the cycle. Any payments made during the
cycle are subtracted to find the daily amount you owe. Depending on the plan,
new charges may not be included. All credit cards must disclose their method of
finance charge and the annual percentage rate.
2) Transaction Fee's
Some banks charge you for every credit card transaction you incur. Banks use
this strategy to increase profits since half of their cardholders avoid service
charges by paying off their monthly balance. If you use your secured credit
card frequently during the month, you're better off selecting a card with low
or no transaction fees.
3) Beware of Low Introductory Rates
Sometimes a bank will advertise a bad credit card with a low "introductory" or
what's known as a "teaser rate". Study the disclosure carefully because you may
be surprised to find out the rate will skyrocket after a few months. Plus if
you have bad credit, your new secured card may arrive with a much higher
interest rate than advertised.
4) Grace Period
This is the interest-free period from the purchase date to the payment due date
and applies only to accounts that do not carry a balance. If you have a habit
of paying off your monthly balances, be sure you have a grace period, otherwise
you'll be paying extra interest.
5) Credit Limits
Banks will set your card limit based heavily on your credit rating. This limit
includes all purchases, cash advances, balance transfers, fees, and finance
charges. If you exceed the credit limit, expect to pay dearly in "over the
limit fees", and possibly higher interest rates. If you possess a bad credit
card, expect to see astronomical interest rates if you exceed your limit. Be
sure to monitor your credit card balance and never max out your bad credit
credit card. This will only hurt your credit score.
It is the goal of this article to provide valuable insight into helping you
select the best secured credit card for your financial needs. Even though your
choices among bad credit cards may be limited, that doesn't mean you can't shop
wisely for your next credit card.
Bobby Tan is a debt consultant helping people resolve bad credit issues. Find
Bobby's reviews of the hottest bad credit cards at Bad Credit Card Tips web
blog.
Get Bobby's free 33 Days To Near AAA Credit course. Click -
http://www.badcreditcardtips.com
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