Do I Need a Second Chance Credit Card?
People who have made mistakes related to their credit and credit cards can turn to “second chance credit cards” for a fresh start. Providing an avenue for consumers to prove their creditworthiness is the goal of these second chance credit cards.
Another name for these second chance credit cards is “bad credit” credit cards. By providing the consumer a second opportunity to practice good spending habits, the card issuer hopes the cardholder will be able to improve his credit. As far as benefits go, second chance credit cards and “standard” credit cards are very much alike.
Second chance credit cards come in many different types and whether you will be approved for one will depend on how bad, or good, your credit score is. You may be eligible for a secured credit card or maybe an unsecured credit card. A prepaid credit card is another option.
Prior to applying for any second chance credit card, it is best to contact the credit card provider. The credit card provider will be able to help you with regard to what type of card would be best to apply for, depending upon your credit history. The reason it is important to contact the credit card provider first is because applying for a credit card and being denied will be reported on your credit report and will further damage your credit score.
A “standard” MasterCard or Visa is very much like an unsecured second chance credit card. However, the difference is that the unsecured second chance credit card will carry a much higher annual percentage rate (APR). This means that, if you don’t pay the bill in full each month, you will be paying a much larger amount in interest. The reason for the higher APR is that the cardholder is considered a higher financial risk to the credit card provider because of the cardholder’s documented spending and paying habits.
A secured credit card is different from an unsecured credit card in that a deposit is required before the secured credit card may be used. The deposit which the cardholder provides to the credit card company then becomes the credit limit associated with the credit card. If the cardholder misses a payment, the credit card company will make the payment from the deposit on hand. If the cardholder is in good standing when the account is closed, the deposit will be returned to the cardholder.
Both secured and unsecured credit cards can help a consumer to rebuild their credit score by the card provider’s reporting to the three major credit reporting agencies. This, of course, will require the cardholder to maintain good spending practices. After a while, the consumer will be able to qualify for credit cards with better APRs and lower credit card fees and charges.
If you wish to use a prepaid credit card, you will be required to “load” funds on the credit card by going to a location which offers this service or by using direct deposit. Because prepaid credit card providers are not offering a line of credit, these cards do not help to repair credit.
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