There are some indications that consumers are returning to credit cards as a way to finance certain purchases, but credit cards are also a tool that consumers have used to improve upon a bad credit score so that they may be able to qualify for low rate credit cards in the future, which again, could be helpful for responsible consumers who are making certain purchases. However, despite the fact that there are reported increases in credit card demand, there are some consumers who are still attempting to overcome a poor credit score and may only have secured credit cards as their only option.
Yet, before a consumer turns to a secured credit card as a way to help them improve their credit rating, costs of secured credit cards need to be considered and consumers must understand what these cards will entail before they begin the process of using secured credit to repair their history and score. Obviously, the interest rates that are being seen on credit cards for bad credit borrowers will vary from one lender to another and will also be influenced by a particular borrower’s financial position but many secured credit cards are averaging rates of around 19% to 24%, but there are also some bad credit credit cards that are advertising rates in the single digits as well.
What this means for a consumer who is looking for one of these secured credit cards or simply a bad credit credit card available to someone in their position, is that if a rate is given on this particular card that may be relatively high, it’s going to be understandable since a consumer seeking this card likely has a bad credit score but it also needs to be factored into how a consumer uses their secured credit card for purchases that will ultimately build their credit history. As an example, if a consumer has a secured credit card with a rate from 19% or higher, they will be in a position where they have to meet higher interest rate payments if they carry a balance, and this is where financial advisers have cautioned consumers against carrying a balance on secured credit cards.
Ideally, consumers who have one of these secured credit cards and will be using it for the purposes of increasing their low credit score will most often benefit from making affordable purchases and paying them off in their entirety each month. This can not only help consumers avoid interest rate payments but will require that they budget in such a way where they will not miss payments, which could cause a further decrease in their credit score and cause a cardholder lose any money they have set aside to secure this credit card.
Yet, responsible credit card users have traditionally been in a position where they use secured credit cards as a way to qualify for lower interest rates, which is something that may take time but it can be beneficial in the long run. Secured credit cards that are used to improve a consumer’s financial position are not necessarily going to only be able to help consumers when it comes to getting affordable unsecured credit cards but this can be the first step on a road which allows a consumer to improve their overall credit rating to such a point that other areas of their financial life, like interest rates on a mortgage or car loan, may also be more affordable as well.
The decision to use a secured credit card will be a personal one by a consumer, as there are different ways which an individual can improve their credit history, with a secured credit card being only one route. However, when it comes to rebuilding a bad credit score, no matter the method that a consumer uses, it will benefit these individuals in the long run through not only more affordable rate opportunities on future lines of credit but will potentially help these men and women develop better financial habits so problems related to their debt obligations will be less likely to arise.