Bad Credit Credit Cards....Buyer Beware.

We’ve all heard the car ads on radio shouting: no credit, bad credit, no problem-we’ll put you in the car of your dreams if you come down to the lot today!  Sounds great doesn’t it?  What they don’t tell you is that you may only be approved for an extremely high interest rate and you probably won’t get the car you want.  The same holds true for credit cards marketed to people who have bad credit.  Don’t be fooled by the promises of guaranteed approval and a minimum credit line, because they are not trying to help you out of the goodness of their hearts.

At some point in our lives most of us face financial difficulties, fall behind on payments, or go through bankruptcy.  Any of these situations can ruin our credit and make it hard to get out of debt.  Credit card companies know this and have come up with credit card offers that promise you will be approved, have a credit line of at least $250, and be able to build back your credit.  Before you think this is the answer, you should be aware that these cards charge several high fees and have stiff penalties for late payments and monthly balances.  In addition, if one company doesn’t approve you for their card, they can then send your personal information to other companies that offer even worse deals.

All of these credit card offers for people with bad credit are very similar because they see you as high risk for nonpayment of debts, allowing them to charge whatever fees and interest rates they want.  For example, they will charge a program fee of $95, an annual fee of $48-$150, a yearly participation fee of $72-$95, and a monthly maintenance fee of $3.00.  In addition, they charge you $3.95 per month for internet access and require you to enroll in auto payment, which is $5.00 a month.  And just to add insult to injury, they charge you $25 every time they increase your credit limit for paying on time!  They typically start you at a $250 credit line and deduct these fees upfront, so you are left with roughly $70 of credit. Interest rates on these cards may start as low as 9.9% but can quickly rise to 25-29% if you have 2 late payments in a 6 month period.   In essence, you are paying them for the “privilege” of owning their card.