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Applying For A Credit Card With A Low Credit Score.

Article By : Patrick Mansfield | U.S. Consumer Finance
Credit Cards with bad credit

No matter how low your FICO score, you’re bound to get credit offers. However, some of these offers are not all that they seem. You need to be sure that you carefully read the terms of use that are enclosed with any credit card offer. These terms will outline the various fees and interest rates that will be charged as over time as you use the card. The issuers are required to share this information with consumers, but they are not required to make these terms easy to understand. 

Many of the cards that are offered to people with a low FICO score or bad credit will charge a membership or participation fee up front. While the names of these fees might vary, the fact remains that they will be charged. Some companies will charge the fees once a year and call them “annual” fees, while others charge them only once and call them “activation” or “acceptance” fees. Some companies might charge a lower fee on a monthly basis, and label it a “monthly maintenance” fee. The most important thing to keep in mind as you consider your options is to determine the immediate effect that these fees will have on your credit line; a card with a $200 credit limit that charges $100 in fees leaves the consumer with only $100 in available credit, which might be significantly less than expected. 

Another type of fee that some creditors charge is the transaction fee. If you use your card to get a cash advance, you are charged a set fee. This, too, can affect your credit line. Other companies tack on a fee if you exceed your credit limit, thus increasing the amount of money for which you are charged interest. 

The Annual Percentage Rate, or APR, is the “cost” of the credit extended to you. This rate must, by law, be disclosed to you before you activate your credit account, and the rate is always clearly marked on your monthly account statements. In general, the lower your FICO score, the higher the APR; a consumer with low FICO score is considered to be more of a risk, so there is a greater rate of interest to open a line of credit. The creditor must also share the “periodic rate”, or the rate the creditor applies to the outstanding balance to figure the charges per billing period, on a regular basis. The issuer must share the frequency and amount that your rate might change prior to activating your credit account. 

If you pay your card’s balance in full prior to the due date, many issuers will forgive finance charges. This is called a grace period, and without it the issuer could potentially charge you from the date that you first use your card, or from the date that every transaction is posted. If your issuer does not provide a grace period, it’s vital that you understand your issuer’s method of calculating your finance charges. This can make a tremendous difference in the amount you’ll pay in fees. Many credit companies will allow you to move your debt from one card to another card that has a lower rate of interest, but you must carefully review the offers and the terms prior to making any sort of change. With careful consideration, you can find the credit card that is right for you, bad credit notwithstanding.
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