Post-CARD Act Options for People with Bad Credit
Getting back on your feet after you’ve had some credit trouble can be difficult, especially since many options for people with bad credit are expensive. You certainly have a steeper hill to climb once you are in this position, but the new credit card law (CARD Act), the final phase of which took effect on August 22, has had a positive effect on the offers for bad credit credit cards.
If you fit into this credit category, you have options in both secured and unsecured credit cards. An unsecured credit card is what most people would consider a regular credit card, and these offers have changed significantly due to CARD Act regulations on fees.
The CARD Act stipulates that a credit card company may only charge 25 percent of your credit limit in fees (excluding penalty fees) in the first year the account is open. This is an improvement on the old system in which a credit card company gave you a credit card with a $250 credit limit that already had $200 in fees charged on it by the time you got to use it, leaving you with access to only $50 worth of credit.
Since this change in fee structure, unsecured credit cards for bad credit have been adjusted to include a processing fee that you pay prior to the account being opened. This fee is usually between $25-$45 and is in addition to an annual fee that is usually around $75. Although fees for these cards are still high, they are significantly lower overall and provide the cardholder with access to around $200 worth of additional credit once the account is open (a big improvement on the $50 worth of credit provided by the pre-CARD Act offers).
People with bad credit should also consider secured credit cards as a good alternative. These cards work just like a regular credit card except that you place a fully refundable deposit to open the credit card and your credit limit matches the amount of the deposit you put down. The minimum deposit is $200. These cards do not offer the additional line of credit that unsecured cards do, but the fee structure is generally less expensive.
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