Second Chance Credit Cards Guide
Second chance credit cards can be unsecured or secured credit cards that are offered to applicants with bad credit. For someone with low credit or no credit, they present access to a Visa or MasterCard card and a path to rebuilding one's credit score.
If your credit score is low and you have had some mistakes in your credit history, do not worry; There are actually banks that will give you second chance credit cards. These so-called 2nd chance credit cards may have higher interest rates than their regular counterparts. That is mainly because banks have to take on additional risks in working with clients with lower credit scores. However, it is really a temporary situation. When used responsibly, these cards can help rebuild your credit so that you can qualify for better terms with a regular credit card.
Second chance credit cards are also referred to as bad credit credit cards, since they are often offered to applicant with low credit scores who would otherwise be denied a card. You should apply with these companies first, and they include Orchard Bank, Capital One and Household Bank. These are considered the more reputable 2nd chance credit card companies that will more easily approve applicants with bad credit. There are others that you can apply for as well, and you should check out several offers and compare them.
Unsecured second chance credit cards for bad credit work exactly like a regular credit card. They extend you a line of credit which you can charge as you like. Then, you make them monthly payments which are usually about two to four percent of the balance. Therefore, if you make $500 worth of charges, you can expect to have to pay about $20 a month in payments. However, interest rates for these cards can be extremely high.
The lower your credit score, the higher the interest rates (annual percentage rates, APRs) are going to be. These interest charges can add up dramatically, so with second chance or bad credit credit cards, it is best to pay your balances off as quickly as possible before interest charges set in.
If you are using these second chance credit cards to rebuild your credit, you need to pay attention to a few things. First of all, make sure that you make your payments on time every month. If you miss a payment, they can charge you typically $39 in late fees. That amount gets added to the next month's bill and makes it harder to catch up on your payments.
More importantly, though, if you are looking at this as a 2nd chance credit card to help rebuild your credit, late payments can have a strong negative impact on your credit report that you made a late payment. Most people with high credit scores have not made a late payment in the last forty eight months. However, if you miss the payment by only a few days, your record may still be kept intact. A lot of times, a late payment will not show on your credit report until it is 30 days late. In addition, if you only make one late payment, call the bank because they may be willing to waive one late payment a year.
If you cannot get approved for an unsecured second chance credit card as mentioned above, the next option is to go for a secured second chance card. These are bad credit credit cards that are guaranteed with an initial secured deposit equal to the spending limit on the card. With this security deposit, it makes it easier for the card company to make an approval. In fact, some credit card issuers are willing to bypass a formal credit check when approving applications.
With most secured credit cards, transaction activities on this type of cards will still be reported to the main credit monitoring agencies like Experian and Equifax. That will allow you to rebuild your credit at the same time that you use the card with care. If you own a separate business entity that you want to build up credit for, you can consider second chance credit cards for business.
With secured second chance credit cards, the advantage is that as you demonstrate healthy card usage patterns and consistent on-time payments, some card companies will review your account and upgrade it to an unsecured card. Over time, you can qualify for better and better terms, and eventually, be viewed as a customer with good credit deserving their best terms. It all starts out as a second chance, and you can build up your credit from that point on. To get started, check out offers from various companies and weigh out the pros and cons of each offer.
If you think you are unable to qualify for any credit card, or the deposit for a secured card is beyond your means, check out the advantages of a Prepaid Visa Card. We found one company that is currently offering a $15 deposit bonus (subject to change over time).