If you have challenged credit and are looking for a credit card, you may be wondering what type of credit card you should get.
You have three options. You can get an unsecured credit card, a secured credit card or a prepaid credit card. Each of these has it’s advantages.
To be approved for an unsecured credit card application, you will need to have the best credit of the three options. An unsecured credit card does not require any type of deposit, and your interest rates and fees are typically the lowest.
If you have less than perfect credit and you have an unsecured credit card offer, it probably makes sense to go this route. It is the best way to build credit card credit, because it will have the most positive impact on your overall credit score.
The primary disadvantage is that unsecured credit cards can be more difficult to get.
If you make an unsecured credit card application and are declined, you may want to consider a secured credit card
Secured credit cards are a good option for people with bad credit or those who have no credit at all.
You will make a deposit with your credit card company and receive a credit limit in that amount or sometimes more. If rebuilding credit is your goal, you need to make sure that you go with a credit card company that reports to all three credit bureaus. Unlike unsecured credit cards, some secured credit card companies do not report.
An advantage to a secured credit card is that as long as your limit does not exceed your deposit, you are not really creating debt. This can be attractive for people who have had past credit problems and are gun shy about creating new credit.
A prepaid credit card can also be a good option, depending on your goals. You open a prepaid credit card by making a deposit with the credit card company. Though your card will bear the Visa or MasterCard logo, it isn’t really a credit card.
In actuality, it acts more like a debit card that is attached to your checking account. Still, it has many of the advantages of a credit card. It can help you make online purchases, rent a car, or pay for gas at the pump.
Unlike unsecured credit cards and secured cards, prepaid cards have no qualifying at all. You can actually walk into your local Wal-Mart and get one! In addition to that, there are no interest fees, no payments and no over limit fees. Your card simply shuts off when you are out of money. Many people who have had credit problems like the fact that they aren’t going into debt when using a prepaid card.
The primary disadvantage is that a prepaid debt or credit card will typically not help you rebuild your credit. There are a few that will, but they tend to have very high fees. Be careful of prepaid cards that claim they will help your credit! This is often advertised when it isn’t true.
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