If you’ve had a hard time lately from a financial standpoint, you may have started to look into a number of new alternatives for your needs. Many individuals look away from getting standard credit cards if they’ve been forced to when getting themselves into a bad credit situation. Thankfully, there are a number of alternatives that individuals can apply for nowadays that can help to provide them with the convenience of a credit card without further endangering their credit rating.
If you’ve considered guaranteed credit cards for bad credit you may understand how they can help you. However, it’s good to find out a bit more about these cards so you can ensure they’re the right fit for your needs. Although a guaranteed credit card help you gain additional credit you will be able to execute payments easily online and it will help you when you are looking to rent a car or book a hotel. Since many of these services require a credit card for payment (versus bank transfer or debit card) you may want to consider an alternative such as a Canadian guaranteed credit card.
Background on Guaranteed Credit Cards
Guaranteed credit cards are cards that offer guaranteed approval, typically online or over the phone. In order to get a guaranteed credit card, you need to apply but no detailed credit checks are conducted. In comparison to prepaid credit cards, however, the customer will start building a payment record. This way if you do have a bad credit history you can start to turn that around. As a result, this can slowly build a case for your ability to pay on time and help you down the road when you are applying for future credit. To guarantee the amount provided to you on the card, you will have to deposit a certain amount of funds in a special account at the issuing institution.
In many cases, guaranteed credit cards can be useful when you have gone through a divorce (if you don’t have much credit history in your own name), personal bankruptcy or another negative event in your life.
Benefits of Guaranteed Credit Cards for Bad Credit
For those of us who have bad credit but still want a credit card, guaranteed credit cards can be very beneficial.
One of the best parts about a guaranteed credit card for bad credit is that you don’t need to worry about credit checks. If you’ve been rejected before, you know that it’s not a good feeling so at least you can put this worry to rest. This is the primary benefit of a guaranteed card – that you can obtain one.
Also, getting a guaranteed credit card can help you be more responsible for your money and manage it better overall. If you’ve got to a situation where you have a bad credit record, you need to make money management a priority. With a guaranteed card, you can only spend what you have so it forces you to adopt better habits with your money.
Most important is that with a guaranteed credit card, you can start to improve your credit rating over time. Many of us – especially when we are younger – underestimate the importance of a good credit rating. It is an essential element in us securing a mortgage and a number of other loans that we may need to get throughout our lives.
Factors to Consider
Like everything in life, there is still a downside to a guaranteed credit card and you should be aware of these before you sign up for one.
First of all, guaranteed credit cards may have higher interest rates and could have additional fees. Since these cards are being offered to customers who have minimal credit options, credit card firms know that they can charge them higher fees and it’s unlikely to be disputed.
You also need to remember that with a guaranteed credit card, you won’t be able to access the funds you’ve deposited to secure the card. If you want to cancel your card, you can do so without penalty most of the time. However, when you retain the card, your funds will be kept by the bank in the designated account.
You should also ensure that you look at the credit limit you’re being offered. Guaranteed cards notoriously have lower limits, usually no more than two or three hundred dollars. This may be a good thing if you have bad credit as it will ease you into having a credit card again. However, it may not be worth it if the fees are too high.
Some Cards to Consider
If you have bad credit and want to apply for a guaranteed credit card, there are a number of options in Canada you can consider, including –
- CapitalOne Guaranteed MasterCard ($59 annual fee, 19.80% APR)
- CapitalOne Low Rate Guaranteed MasterCard ($79 annual fee, 14.9% APR)
- Home Trust Secured VISA ($59 annual fee, 14.90%)
- Home Trust Secured No Annual Fee Visa (no annual fee, 19.99% APR)
Guaranteed credit cards can offer you another alternative if you find yourself in a bad credit situation and want the convenience of a credit card. By applying for a guaranteed credit card for bad credit you can still shop with your credit card and use it book some elements that only accept credit card for payments. Once you’ve considered all of the pros and cons of a guaranteed card, you may be ready to take one on and starting using it to build back a positive credit rating over the long-term.