People with excellent credit history may find it easy getting a credit card, but even borrowers with thin or otherwise unflattering credit files can receive approval from a few different sources without much difficulty. While these types of cards have fairly lax credit standards, they often come with additional hoops that traditional cardholders don’t have to jump through.
Secured credit cards allow you to use your own money to build your credit history. This type of credit should not be confused with prepaid cards, which draw directly from the funds you put into the account. With a secured credit card, you provide the card company with cash that is placed in an untouchable escrow account. You can also use a certificate of deposit as collateral. In either case, you then receive a credit limit in the amount of your deposit. After building a consistent history of on-time payments and responsible credit use, you may become eligible for credit limit increases and can even graduate to unsecured status. Your credit history is usually not an issue with these cards, so this is a good option for people with questionable credit.
Also known as store credit cards, these are unsecured lines of credit that can only be used at a particular retailer. The store often offers cash back rewards, discounts, low introductory interest rates or deferred payments, making them an attractive option for both building credit and possibly putting a little extra money in your pocket. These credit cards often have less stringent application requirements because the credit limits and subsequent risks are usually low.
Most credit cards are unsecured, but these usually come with rigorous credit and income requirements, making the “easy” category fairly small. However, lending institutions as large as Capital One and as small as Credit One Bank all offer low-limit unsecured cards to people with at least marginal credit histories. The appeal of easy unsecured credit makes this sector of the industry ripe for unscrupulous card issuers, so borrowers who choose this route should be especially diligent.
While these cards may have accommodating credit requirements, they often make you pay for it in the end. One way is through high application and annual fees that are usually taken directly out of your credit line, decreasing an often small limit even further. In addition, so-called “easy” cards often come with high interest rates as well as exorbitant fees for cash advances. Many cardholders also deal with larger late payment charges and various service fees simply for conducting regular business with the card. You may also have to pay a fee to have your credit limit increased. And many credit cards that fall into this category do not report your payment history to the three credit reporting agencies. This means they may not be able to help in your credit building efforts.
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