Consumers Seeking Credit Cards for Bad Credit Have to Pay a Price
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by: barrywaters
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The credit crisis of the past year and the economic downturn caused lending institutions to adopt more restrictive standards for borrowers, which means there are more people who looking for credit cards for bad credit. The Target Corp recently put out its earnings for the last quarter. The retailer has already been affected by the fact that people are simply spending less, but its bottom line took a blow from having to soak up losses from consumer credit card delinquencies. Adopting stricter lending requirements is one of the goals for the company to help it stay afloat. That means that fewer consumers will qualify for a Target credit card. The retail giant has even said that they are shifting their attention back to giving customers what they need in their stores. Consumers looking for credit cards for bad credit may be turned away by Target. Other lending institutions and banks are joining the movement in tighter standards, as well. Account delinquencies have caused institutions to decrease credit limits, increase rates and even cancel some accounts. Another company that followed suit and even raised the bar for standards is American Express. The company announced a deal for its most delinquent account holders to close their accounts. It offered to pay those customers $300 to pay outstanding balances and close their accounts by the end of April. Those seeking credit cards for bad credit need not apply to American Express right now.
With all the restrictive lending standards being adopted by credit card companies, where do consumers turn when they need credit cards for bad credit? The best way for people to establish credit and have a credit score is by having credit cards in good standing. You need a credit history to get credit. It is a tough dilemma for those struggling to establish credit or rebuild after some financial mistakes. That is not to say there are not plenty of credit cards for bad credit, but they come with a high cost in the form of high interest rates. Many exceed 35 percent. With such a high rate, a consumer who already has a less than perfect credit history can often fall into more debt and make his credit worse. A prepaid credit card is one of the best solutions for those looking for credit cards for bad credit. A prepaid card has none of the pitfalls of a traditional credit card. It does not tempt a consumer into buying things he cannot afford. And it will not let a consumer easily fall into debt. The consumer must pay for the card first, so it does not require a credit check. For those who want to use a credit card instead of carrying cash or a checkbook but are not eligible for a low rate account, a prepaid card may be just the ticket. They also help those who have previously had credit card debt establish some responsible credit card spending habits. The downside to some prepaid credit cards is that they may charge a fee or do not report to credit agencies. See More Credit cards | Bad credit credit cards | Student credit cards |
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