If youve got a history of poor credit or dont have any credit history to speak of, the process of getting a credit card can quickly seem overwhelming. If you get approved for a credit card at all, it is likely to be one with unfavorable terms like low credit balances or extremely high monthly interest rates. Regular credit cards also often have high yearly fees that will only be added to your existing balance. Financially speaking, it can be hard to navigate through life without a credit card at all. It is important to realize, however, that there are options out there like credit builder credit cards that are designed specifically for people in just that aforementioned situation.
Credit builder credit cards have a number of clear benefits that regular cards dont have, especially when youre just starting out building a credit history. They often allow you to use lower balances as a benefit instead of a hindrance. You can put small bills, gasoline and other small purchases on your card and pay the balance in full each month. As the cycle continues, you will slowly but surely begin to establish yourself as a borrower with a positive history. After a period of anywhere from a few months to a few years you will be able to graduate to a full-fledged credit card with terms that are more to your liking.
Additionally, credit builder credit cards are great for starting you out with a situation that you can actually manage. A few missed payments or wrong moves with a regular credit card and your credit history could be damaged for a period of several years. With a credit builder credit card, the potential penalties that you would face from a missed or late payment are much less severe.
Credit builder credit cards are also a great way to manage your overall spending habits. Some credit builder credit cards require you to actually pay in advance towards the amount of money that you plan on spending. If you know you have a $600 purchase coming up that you want to put on a card, for example, you would be forced to pay that amount of money to the credit card vendor in advance before you could actually use the card. As a result, you still get all the benefits of building credit but cant actually spend any money that you dont have.
Credit builder credit cards are great solutions for two types of people. The first is the type of person who once had â€œregularâ€ credit cards but, though a series of poor financial decisions, now has a damaged credit history. In a scenario like that one, getting a regular credit card would be incredibly difficult and sometimes downright impossible. The second type of person is someone who has not previously had any loans or credit cards that had been used to establish a credit history in the first place. Most young people leave high school and even college without any type of card, which can spell trouble when it comes time to apply for a car loan or for the mortgage on a house. Credit builder credit cards allow you to start laying the groundwork for your financial future.
It is important to realize that credit builder cards arent just good for graduating to a regular credit card. A persons credit history is extremely important and will affect everything from renting a new apartment to signing up for certain types of services and utilities. Some modern day apartment complexes will conduct a credit check during the initial application process. If the leasing office sees that you have a poor credit history, they may use that information as a grounds to deny your application. By starting to repair or build your credit as quickly as possible, you can take the proactive steps that you need to make sure that youll always have a spotless track record to refer to in the event that you need it.
Credit builder cards are also great in the event of an emergency. As they traditionally carry low credit limits, having one around could be a great way to protect yourself against unforeseen financial hardships like the sudden loss of employment.
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