How important are credit cards? Consider the fact that there are certain services that will be inaccessible without them. In order to get a rental car or pay for cable TV/Internet, cash will not do, the purchaser will need to have a credit card. There was a time when getting one without good credit history was next to impossible, but in recent years with a bad economy and previously reliable borrowers defaulting on loans, credit card companies have relaxed the rules somewhat and are allowing even people with bad credit histories access to credit cards and the benefits that come with them. So what are the options available to those with poor credit histories?
Prepaid Credit Cards
Those who have used prepaid services such as those offered by some mobile phone services will already be familiar with the concept: the user places an amount of money onto the credit card, and that amount, less any fees, will be available for them to spend using the card. It is that simple. Many of these cards can be purchased on the Internet, and can be used anywhere that regular credit cards like Visa or MasterCard are accepted. The card will come in the mail with the owner’s name stamped on it just like a regular credit card. No one will be able to tell the difference between a prepaid card and a regular credit card except for the owner. The drawback with prepaid credit cards is that they do not help to boost credit scores, and therefore will not help a person with bad credit to repair their credit history.
Secured Credit Cards
These have often been recommended for people with no credit history or a bad one as tools for building or repairing their credit scores. Unlike prepaid credit cards, the issuers of secured cards do report to credit agencies, which means that using them can help an individual with bad credit to improve their score. Aside from that, secured credit cards have a few similarities with prepaid credit cards among them is the fact that the amount that the card’s owner places into the account will be the credit line. The credit card owner will open an account with a bank and deposit a certain amount into it. $500 deposited into the card’s account will provide $500 to spend, thus ensuring that the card-issuer will not lose any money by providing the card. That deposit is the security referred to in the term “secured” credit card.
These days, having a good credit history is not only important, it is essential. Credit history plays a big role in loans for high-dollar purchases like vehicles and homes as well as in the ability to get unsecured credit cards. The unfortunate fact is that many people have errors in their past that have negatively affected their credit scores and may have hampered their ability to get regular, unsecured lines of credit. Both secured and prepaid credit cards are easily available to those with bad credit, thus allowing them to get all of the services that can only be accessed with credit cards, and in the case of secured credit cards, to repair their credit history.