When an individual makes a poor financial decision, there is a real possibility it will have lasting consequences later in their life. This is because of the way that the United States operates when it comes to residents’ spending histories.
The reporting of the major credit bureaus is what showcases how one has utilized their assets, what their current debt is, and what trends of expenditures they have in their life. This is why people who make mistakes at an early age will get haunted by a bad credit score later on. So, how does one approach a basic procedure such as a credit card application with a bad credit? The solution is a secured credit card.
Obtaining a Secured Credit Card
Almost all financial institutions will provide these types of credit cards. They are based on a prepayment that one will deposit, thus creating an allowance for their spending. After a person has proven trustworthy, that initial payment will be given back to them and they will own an unsecured credit card. These credit cards are used to rebuild one’s spending history and increase the credit score.
Options in the Market
- Capital One Secured MasterCard
This option by Capital One Bank allows people to get an almost guaranteed approval with a low initial payment. It is made for those people who have a credit score in the are of 350 to 630, which is a very low end of the spectrum. The APR will be almost 25% or slightly above the average in the industry. Regardless, the bank will allow one to overcome the bad credit by facilitating installment payments for the initial deposit.
Similar to the aforementioned secured credit card, this one follows a similar pattern. No annual fee, same credit score range, and a $200 minimum initial deposit are required. One difference is that this card will allow one to obtain cashback deals. Thus, every purchase will get around 1-2% rebate. This means that one can work on their bad credit while aiming to get an unsecured credit card eventually, as well as enjoy the benefits of cashback deals and promotions. By having the initial deposit, one is almost guaranteed approval as long as they have another checking account.
- Capital Bank OpenSky Card
This might be the most convenient option for those trying to avoid any type of credit check. The Capital Bank Opensky Card will provide a guaranteed approval as long as you make one deposit from $200 to $3,000 initially. Unlike the previous two, this card will have an annual fee of $35.This serves to compensate for the fact that one’s spending history is not even accessed. According to the bank’s statistics, most of the people who get this card move up to an unsecured credit card and get their credit scores increased in a timely manner.
Unsecured Credit Card
Although there is no such thing as a guaranteed approval for these credit cards, one can contact the prospective bank to see what their odds are. The reason why they are harder to obtain than secured credit cards is that there is no collateral the bank can fall back on. Meaning, there are no assets to be repossessed such as an initial payment. This represents a higher risk for the bank, thus showcasing as a lower approval rate for the customers.
The Route to Take
One should look into obtaining a secured credit card the moment that they realize their credit score is low. By just having a credit account open, it will help increase the credit score over time. Also, getting educated on spending limits and how to approach them is of extreme importance. Having a card is useless if one always exceeds their spending limits and is late with the payments. Researching online can facilitate better spending decisions and a brighter credit future!