What Are Second Chance Credit Cards?
Have you made some mistakes with regard to your credit cards? Don’t feel alone, many people have! Issuers of “second chance credit cards” are willing to give consumers a second chance to prove their creditworthiness.
These cards are also called “bad credit” credit cards and the whole reason behind these cards is to provide the consumer with an opportunity to improve their credit by practicing good spending habits. These cards normally offer the same benefits as a “standard” credit card.
There are several types of second chance credit cards. Which one you will qualify for depends on how good, or bad, your credit is. Some people will qualify for an unsecured credit card, while others may qualify for a secured credit card or possibly even a prepaid credit card.
Prior to applying for any second chance credit card, it is best to contact the credit card provider. The credit card provider will be able to help you with regard to what type of card would be best to apply for, depending upon your credit history. The reason it is important to contact the credit card provider first is because applying for a credit card and being denied will be reported on your credit report and will further damage your credit score.
An unsecured second chance credit card is very much like a typical MasterCard or Visa. The main difference being that these cards normally carry with them a much higher annual percentage rate (APR). This means that the cardholder will pay a higher rate of interest with this card if the cardholder does not pay the bill in full each month. The reason these unsecured second chance credit cards carry such a high APR is that the cardholder presents a higher risk to the credit card company because of the cardholder’s past spending and payment behavior.
There is a difference between secured credit cards and unsecured credit cards. The difference is that secured credit cards require a deposit prior to being used. This deposit will then be the cardholder’s credit limit. Any missed payments will be deducted from the deposit provided by the cardholder. If the account is closed, the deposit will be returned to the cardholder, provided the account is in good standing.
Because most of these second chance credit card companies report to the three major credit reporting agencies, the cardholder of a secured or unsecured credit card will be able to rebuilt their credit score. Of course, this reporting will only help if the cardholder maintains good payment and spending practices. In time, the cardholder will become eligible for better credit products.
If you wish to use a prepaid credit card, you will be required to “load” funds on the credit card by going to a location which offers this service or by using direct deposit. Because prepaid credit card providers are not offering a line of credit, these cards do not help to repair credit.
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