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2007-10-08 03:27:52

Disclosing Subprime Credit Card Deals

It is estimated that US customers have got addicted to credit cards so much that they are desperate for a new one even if deep in debt and facing bankruptcy. Very often, either because credit users don't read the terms or just don't understand them, they make deals which are actually against their interests.

Subprime, or bad, credit cards are disclosed as the last whatsoever resort for people in debt. Though these credit cards are aggressively marketed by companies and readily accepted by customers, credit unions and some financial experts insist that you are more likely to face an utter financial crash rather than recovery with them.

Why are bad credit cards so risky and sometimes destructive? Don't debtors have other and better options considering their rush for subprime credit? It may seem so, but in fact, the preference for this type of credit cards is merely the result credit illiteracy.

As things are for today, another option for indebted customers could be a secured credit card and at a closer look at its features, you may change your opinion completely. Let's draw a parallel between a bad credit card and a secured credit card to help you make a final choice.

We have a story from one of our readers who said he had just filed for bankruptcy but not a day passed as he received a new credit card offer! It was a card from First PREMIER Bank to improve his bad credit history. The man accepted it. Well, why not? But three months later he was again buried under defaulted credit card bills.

Why did it happen so and would the situation be different if the bankrupt had opted for a secured credit card rather than the subprime one? Credit card companies know it very well that people who have once in their life had credit card can't imagine existing without a plastic. And their hunger for credit card doubles when it promises to improve or even re-build their bad credit history .

But do you know what you are expected to pay for putting you back on track? Dan Farrel didn't know and so he signed up. What did he get apart from the promises of cure? First, he was issued a ridiculously low credit limit of $300 which he found almost unacceptable, comparing it with thousands on his previous credit cards from Discover Bank and Citibank.

But there seemed to be no other way and Dan accepted it. This is the first feature of bad credit cards that causes discontent - low credit limits. But it is only half the trouble. Maybe one could easily do with this $300 but for the outrageous annual fees reaching sometimes more that $50! Add to it account processing fees, monthly account maintenance fee and program participation fee - all of them eating up almost half of your credit limit.

The available credit is, consequently, even smaller. If all these charges didn't threaten Dan out of taking this MasterCard product, then he must have forgotten about late payment fees and over the limit charges.

What remains of your credit after all these charges? Practically nothing. And if you are liable to make a late payment, be sure to end up with a new debt.

Do you still want a subprime card? Learn about a secured credit card before signing up. First, its credit limit is determined by the customer himself, provided he makes a deposit of the same amount. Second, the rates and fees on a secured card are generally lower and if you happen to default, the creditor can reach to your deposit to take what you owe.

You see, you are more secured with this credit card. You won't lose more than you already have. At the same time the card helps you to re-build you credit history damaged by debt or bankruptcy .

So, why do most people still prefer bad credit cards? It's because secured products are not that beneficial to companies and so are not promoted. You are more likely to find a competitive secured card at credit unions than at a big credit company.

No one will help you but you yourself. Compare all credit cards available and do not rush for the first bad credit card on you way.

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