Credit Card Options for People with Bad Credit (cont.)
Contributed by Deb Powers
Prepaid credit cards have a number of excellent uses. They can be a way to give an allowance to a child at college or in high school without giving them cash or a credit card, for instance. However, unless it's specifically stated in the credit card terms of service, don't count on them making reports to credit agencies on your behalf. Most don't.
Secured credit card - the best option for people with bad credit
A secured credit card is one of the best options for people who've failed to get approval for a standard credit card. Your approval for credit is contingent upon a deposit to the credit card company's bank. Your initial credit limit is usually the amount of your deposit. As you make purchases and payments on time, the credit card company may increase your credit limit to 150% or 200% of your security deposit.
Unlike a prepaid card, where you are actually spending your own money when you make a purchase, with a secured credit card you are buying on credit and reestablishing your credit history. The security deposit is only touched if you default on payments. Check around for the best interest rates, since they can vary widely.
