Find the Right Credit Card for You: Secured vs. Unsecured Credit Cards with Bad Credit

Once you have received the news of a bad credit score, it is very easy to get discouraged about your future purchasing powers. If you once had credit cards and now cannot qualify, this can be even more frustrating as you worry about what you will do in times of emergency financial need. However, people with bad credit are actually quite able to find credit cards with little to no hassle. It is merely important that they understand the options – secured or unsecured credit cards – and the obligations for choosing one versus the other.Defining Terms: Secured vs. Unsecured Credit CardsMany people think that the term “secured” in the financial world is reserved for loans. However, credit cards, which offer a person flexible spending options, also come in both secured and unsecured options. The first, the secured credit card, is the easiest for a person with bad credit to acquire.A secured credit card is usually the first type of loan a person with bad credit should take. By offering the credit card lender a security deposit, generally around $500 or so, you allow yourself the ability to spend “on credit” and build up a credit score. Each month, you pay your balance off according to your contract. Failure to do so will cost you a fee, plus some of the deposit you offered. This saves the lender from the risk of your bad credit and saves you from the prospect of building up more debt which will pull you bad credit score down even further.The second option is an unsecured credit card. Most people with good credit and fair credit scores use unsecured credit cards for their financial needs. In this case, a lender offers you a “line of credit” for purchases and then charges you interest if you cannot repay those purchases within 30 days. When you miss a payment on an unsecured credit card, you are also charged a fee and, possibly, your interest rate will increase.Choosing the Right Card for YouClearly if you do not have access to the deposit required for a secured credit card then that option is not available for you. However, with bad credit, unsecured credit offers will be harder to find and generally carry high initial interest rates.If you are sure that the unsecured credit card option is the right one for you, then it will be necessary to do a little detective work to find the best deal given your bad credit. To do this, you will want to contact several (3-5) lenders who offer unsecured credit cards. Talk to them about your particular situations and the deals that they offer. If they require a credit check, make sure that all the lenders perform this check within a two week period – this way it will have less of an impact on your credit score.Once you have all the offers on the table, you will need to pay attention to a few key items to decide which card to choose. These items are:- The interest rate charged.- The credit line offered.- Any fees associated with late or missed payments.- The policy for interest rate hikes following late or missed payments.The lender who offers the best combination of all four of these criteria is the best one to choose.Your Future with Credit CardsThough for many people mismanagement of unsecured credit cards got them bad credit in the first place, proper management of those same cards can likewise help them to improve their credit over time. Remember, credit cards are like any other loan and can increase your credit score just as much as it can bring it down.