Credit Cards, Part 1

Choosing the best credit card offer(s) to apply for requires careful shopping and comparisons between offers, especially if you have average or below average credit. Although many credit card issuers (such as Capital One, First Premier, Orchard Bank, and New Millennium Bank) will approve a credit card application from someone with a low credit score, the APR and fees associated with those credit cards will often be astronomical, and your credit limit will be very low.

For example, one credit card offer that targeted people with a below average credit score offered a 19.75 percent APR with a 25.75 percent cash advance APR, a 25.75 percent delinquency APR for purchases, and a 31.75 percent delinquency APR for cash advances. In addition, this particular card has a $150 annual fee, a $29 one-time account opening fee, and a $6.50 per month account maintenance fee. Additional fees associated with this card included a transaction fee of 5 percent for cash advances, a $35 late payment fee (in addition to the higher APR), and a $35 over-limit fee. According to the credit card issuer, “The delinquency APR will apply in the event that you do not pay the required minimum payment by its due date for two consecutive billing cycles or for any four billing cycles in any 12-month period.”

This offer is a far cry from those 0 percent interest rates for one year and no annual fee credit cards offered to consumers with excellent credit. When shopping for credit cards, be sure to carefully read the Card Holder Agreement or Summary of Credit Terms to fully understand all of the fees and different APR rates associated with the card. Don’t just read the special offer letter, advertisement, or headline and assume what’s being offered is a great deal.

For someone who has a low credit score and a poor credit history, in order to reestablish credit and begin rebuilding their credit score, it is often necessary to take advantage of less-than-attractive credit card offers for a few years. When you pursue this option, however, make sure you’re able to carefully manage your credit card usage to stay current and avoid any excess charges (late fees, etc).

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