Costs of Bad Credit Credit Cards

Bad Credit Credit Cards Typically Carry Higher Costs Than Normal Credit Cards

I have been asked many times: “How much will bad credit cost me?”

It’s hard to tell since each case is different, but I have ventured to answer this question as far as mortgages go in the following articles: Post Bankruptcy Mortgages: Buying a House after Bankruptcy: and The High Cost of a Low Credit Score.

I have always advised bad credit borrowers to look not only at the annual percentage rate for whatever type credit they are seeking, but also at the fees charged, since they are generally much higher when dealing with sub-prime lenders.

This article will look at the effect of bad credit on credit cards.

A credit card can be the way to re-establish your credit, especially after a bankruptcy. You want to show potential lenders that you have mended your ways by using only a portion of your available credit and by paying your bills promptly and without fail.

Ideally you want an unsecured card, but that may be impossible for at least the first few years. In that case your only option is a secured or pre-paid card.

The first thing to look for in a bad credit credit card is a lender that will report your progress monthly to the credit bureaus. This is the only way your credit score is going to improve.

Beyond that, you want to find a card that is affordable, not only in terms of the interest rate, but also in terms of fees.

Commone Bad Credit Card Fees

Fees commonly charged to those with poor credit include the following:

Setup fee - While you can find some lenders that may not charge a setup fee, fees between $29 and $49 are not uncommon.

One time fees – these can be as much as $100

Account maintenance fees - $6 or $7 a month

Annual fees - $35 to $150

Bad credit credit card fees can easily run over $250 the first year, a little bit less after that, if you are not careful.

Then there is the APR. You will rarely find a rate under 25% - 29.99% seems to be the norm.

If you’ve got bad credit, you’re not going to be able to fix it overnight. But as you can see, if you must get a credit card, there can be substantial differences in the final costs.

The solution is to shop carefully and read all the terms and conditions. If you do so, you might save $100 or more a year just on the fees alone.

Calculate Costs Before You Sign Up

Take a sheet of paper or open a spread sheet. Make a row for every fee you find listed, plus one for interest, and add a column for each of the lenders.

Assume you will carry a balance of $500 and using these calculators figure out what your monthly interest charge will be.

Add these all the charges together, so that you have a clear picture which offer is most beneficial to you.

When you have bad credit, you must shop very carefully. There are many wolves out there eager to take advantage of your situation.

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