Use High-Interest Credit Cards Wisely

Let's face it, not all credit histories are stellar. Unfortunately, bad credit happens. It could result from mistakes you made when you were younger and didn’t understand the responsibilities and repercussions of credit, or from unexpected expenses that quickly got out of hand. Regardless of the reason, you may now be trying to rebuild your credit but finding it to be a rather difficult task.

Once your credit has gone south, many financial institutions will be quite hesitant to grant you a new line of credit. To them, you're now considered a high risk. The only way to change this is to prove that you're responsible enough to handle a credit account again. But, you may be wondering how you can do that if they won't give you more credit in the first place. The answer is to this dilemma is to get a bad-credit credit card. As the name implies, these cards are specifically designed for people with bad credit.

There are two general types of bad-credit credit cards. The first is a secured credit card. Secured cards typically carry a high interest rate and require money to secure the credit line. That means you'll have to open a savings account and deposit a specified minimum amount of money in order to qualify for the card. Your credit line will generally be equal to the sum you have on deposit in the account. While this may sound on the surface like a bank account with an ATM card, it's actually quite different. Though your own money secures the card, the charges you make are still processed through the regular credit card system as an actual credit transaction. So, as long as you use the card wisely and make timely payments, your credit score will eventually begin to improve.

The second type of bad-credit credit card is a regular credit card that carries a limited credit line and a very high interest rate and fees. These are indeed regular credit cards, but they're modified specifically for high-risk customers. There are no other differences, and they operate in exactly the same manner as low-rate cards. The downside of these cards, of course, is that you'll be hit with very high interest charges. The credit card companies reason that if they're going to trust you – bad credit and all – with their money, then they're entitled to earn higher fees and interest because of the higher financial risk that you represent to them.

If you choose this kind of card, be very careful in its use because the interest can get out of hand very quickly. This is not to say that you should automatically avoid either of these cards. Indeed, they can be a very effective way to re-establish good credit. But, you must be sure to use them responsibly. Furthermore, if you use them only sparingly and pay the full bill at the end of each month, you don't have to worry about the interest at all.

Reclaiming your credit rating and the confidence of creditors can take time. But rest assured that once you start proving to them you are once more a responsible credit user, you can be sure that more and more credit offers will begin coming your way.

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