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Credit cards for people with bad credit to repair their scores

[Wednesday, August 31st, 2011]

Almost every person in the world today has banks falling over themselves offering credit Cards of every imaginable kind – Gold, Silver, Platinum. The customer is spoilt for choice. But, on the other hand, there are some people who, due to irresponsible spending or just plain bad luck, have a poor credit rating. How do people with bad credit get credit cards?

Secured Credit Cards and Prepaid Credit Cards are advertised for people with a poor credit history. The consumer should first understand the working of both these cards and then choose one. Both cards require you to deposit a pre-determined amount of money before you can use them. Both the cards can be used at all places where credit cards are used.

With Secured Credit Cards, you will be allowed to authorize your card only after the Security Deposits against your credit limit have been done. This security deposit is kept in your savings account or certificate of deposit (CD). The credit card you use for buying will go against your credit limit. After you pay off your credit card bill, the balance is automatically adjusted – just like with regular credit cards. The security deposit is required only because you are a high-risk customer. If you want to work on your credit score, Secured Credit Cards work best for you. Read the terms and conditions carefully. Some cards automatically get converted to unsecured upon timely payments.

With prepaid credit cards, the amount you deposit is directly credited to your card. The purchases you make are automatically debited from the balance. You can re-deposit the desired amount and use it once the balance is down.

People who wish to avoid going to banks can use this card. Some banks do not offer debit cards. Such people can used prepaid credit cards. Most employers can directly deposit money into a prepaid card. The employees can then use this card as a corporate card. Parents can deposit the allowances of their teenagers into prepaid cards. Using them will help them manage money better. Prepaid cards can also be used as gift cards. Your loved ones can use these cards for shopping at places where electronic cards are accepted.

Prepaid cards work in a manner opposite to conventional credit cards. In credit cards, you pay through credit, whereas in prepaid cards you pay through debit. In many ways, prepaid cards are better than credit cards. You will only be spending what you already have. You will not have to worry about loans or interest rates. With credit card, you spend what you don’t have and have the responsibility of repaying it. Prepaid cards work like debit cards provided by banks. People who use Prepaid credit cards do not have to worry about making purchases they cannot afford and getting into debt. It fosters responsibility and freedom from uncertainty.

Prepaid cards do not help you in any way to re-establish your credit image. If that is the goal, you are better off going for a Secured Credit Card.

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