PREPAID CREDIT CARDS

People who can not qualify for a traditional credit card can often turn to a prepaid credit card or secured card as an option.  Both prepaid and secured credit cards are often issued to people with no credit history or bad credit.  However, prepaid credit cards are not the same as a secured credit card.

PREPAID CREDIT CARDS – A prepaid credit card is actually more like a debit card. It involves paying an amount of money into an account that is linked to a prepaid credit card.  Then, as you use the card to pay for purchases, the amount you spend is deducted from the total in your account.  When you use all of the funds in your account, you can't use the card until more money is deposited into the account. 

Most prepaid credit cards are established through a credit company or retail store.  Banking institutions really don't have the need to offer prepaid credit cards since their bank cards attached to a customer's checking or savings accounts functions in the same manner.  Most prepaid credit cards will charge a small fee for setting up the account in the beginning, but check their policy for any additional fees so you know the cost before you set up an account. 

Another thing to consider when wanting to set up a prepaid credit card is deposits.  Some companies require you do a direct deposit while others let you make deposits as desired.  You will also want to know how quickly a deposit is credited to your account.  You don't want to deposit money expecting it to be available immediately if the company takes 24-48 hours to process a deposit. 

What’s the benefit of using a prepaid credit card? A prepaid credit card can be good for helping you to keep track of expenses and stay within budget.  However, if you are looking to improve your credit it probably won't help with that.  Since there is no credit limit or monthly billing, there is nothing to report to a credit bureau and thus your credit score is not affected by a prepaid credit card.  The only exception to this is if the company issuing the prepaid credit card reports your activity to the credit bureaus each month.  If you are trying to establish your credit or rebuild it then be sure to ask whether or not prepaid card activity is reported. 

SECURED CREDIT CARDS – A secured credit card is often thought of as the same type of credit card as a prepaid.  In fact, the terms are not interchangeable.  A secured credit card is actually a type of credit card.  It is most often used for people with no credit history or with a bad credit history.  A secured credit card is one in which the cardholder has to pay a security deposit up front to obtain a credit card.  This security deposit is held as collateral against the credit card in case the cardholder does not pay the monthly bill.  In this way, the cardholder gets use of a credit card and builds or rebuilds their credit while the credit card company has some "insurance" to cover the risk they are taking in offering credit to an unknown credit risk or a person known to have poor credit. 

When opening a secured credit card you want to look for one that has a low fee or startup costs; this will allow you to use more of your available funds towards the security deposit.  Next, you will want to look for a credit company that places your security deposit in an interest bearing account.  You don't want your money to just sit there; it might as well be making interest if you can't spend it.  You will also want to find a secure credit card with the highest credit limit possible.  Some cards will set your credit limit equal to the amount of your security deposit.  Others will only give you a credit limit equal to a percentage of your deposit—some as low as 50% of your deposit.  

Be sure to pay your bill on time each month and pay as much as possible.  At least try to pay more than the minimum amount due.  This will not only save you on finance charges but will help in improving your credit score.  A secured card will not improve your credit history if you pay the bill late or are constantly at the credit limit each month.  If the purpose of obtaining a secured credit card is to establish credit or improve your credit history, then you want to concentrate more on using the card responsibly than on racking up large credit debt. Responsible use not only can improve your credit but after six months of good use you can often request and receive an increase in your credit limit.

PREAPPROVED CREDIT CARDS

Most everyone has gotten a credit card offer in the mail that claims "you have been pre-approved to receive our credit card." It seems a little shifty that some faceless company is offering you unsolicited credit; but, still we are all tempted to fill out the application and await the arrival of the little plastic card that is our ticket to shopping happiness (until the bill arrives).  Before you get out the pen and begin filling out the paperwork, consider where it came from, what it is really offering, and what it is going to cost you.

WHAT ARE THEY AND WHERE DO THEY COME FROM?

Pre-approved credit cards are unsolicited offers sent to consumers to receive a credit card from a specific company.  Since you didn't request an application, you may wonder how an offer for a pre-approved credit card came addressed specifically to you.  There are three major credit bureaus that track consumers credit histories.  They are Trans Union, Equifax, and Experian. 

In order to stay competitive, credit card companies will offer credit to consumers that fit a model they have established.  Basically, they determine what type of consumer they want to target and then request a list of names from the credit bureau's databases that fit their parameters.  Then, they send out pre-approved offers to the consumers on the list hoping to hook a new creditor. 

Sometimes, credit card companies are looking for consumers with good credit scores hoping to lure them away from another company.  Other times they will target people with low credit scores with the hopes of enticing them to sign up for a pre-approved card with outrageously high fees and interest.  The hope is that a person desperate for a credit card will agree to severe costly terms. 

ARE THEY WORTH THE PAPER THEY ARE PRINTED ON?

The offer being sent is merely based on your name being pulled from a database because you met the credit card company's parameters. Also, by the time a pre-approved credit card offer has reached your doorstep it has been several months since your name was pulled from the credit bureau database and your financial situation could have changed.  All this means that a credit card would be foolhardy to simply offer you a credit card with no further information or investigation.  And, the credit card companies know this because the offer comes with an application and not a nice shiny new credit card. 

So, that pre-approved stamped on the envelope is not quite accurate.  It is more of an advertising ploy or gimmick.  Actually, a more accurate description would be "preliminary approval."  The credit card company has targeted you for an offer because you have meets some preliminary requirements they have to be a cardholder.  They now want you to fill out a detailed application and go through another credit screening to be sure your score hasn't drastically changed since they first got your name from the credit bureau database.  And, if you meet all the requirements of this second round and agree to the terms of their contract, you will be finally approved to receive their credit card.  If you don't mind being the target of their slightly deceptive advertising gimmick, then some of the offers you get may be reviewing. 

WHAT TO WATCH OUT FOR?

As enticing as these offers can seem, there are some things to watch out for.  You need to realistically consider why you got the offer?  If you have a good credit score and pay your bills on time, then you could be getting the offer because the company considers you a good candidate for their credit card.  In such a case, read offers looking for incentives and perks they will offer to entice you.  They may offer a lower interest rate or no interest on any balances you transfer from other cards.  They may offer rewards or cash back offers. 

On the other hand, if you have poor credit and a lot of debt, then they may try getting you to apply for a card with outrageous annual fees and huge interest rates and a very low credit limit.  In fact, some of these "pre-approved" offers have such high fees and such low credit limits that by the time they charge all the fees to your card you credit limit is down to $50 or less.  You will basically become a cash cow for the credit card company with no true benefits to you.  If you are honest with yourself about your credit status, then you can honestly evaluate the benefit of any pre-approved credit card.

LOW APR CREDIT CARDS

When shopping around for a credit card you need to be aware of what the card is going to cost you.  Obviously there is going to be a cost to you for using the credit card—otherwise the credit card company would not be in business.  Credit cards can sneak some pretty ridiculous fees into the small print of their contracts, so you should make it a habit to always read the entire document.  Also, be on the lookout for annual fees that can hit you for a loop if you are not cautious.  But, for now, let's examine the one cost that all credit cards have in common—the APR. 

All credit cards charge interest on any balance not paid in full when the bill arrives.  This interest rate is often referred to as the APR or the Annual Percentage Rate.  The percentage of interest charged is usually linked to the prime rate.  Credit cards can offer one of two rates to their customers.  They will offer a fixed rate that does not change from month to month or they will offer a variable rate that can change every month depending on how the market is doing.  You need to examine what type of rate a credit card is offering and determine which would be the best choice for you.  This can involve a little guesswork and even a bit of a gamble.  If you think interest rates are going to decrease, then you may want to gamble on a card with a variable rate, but, if the stress of such a gamble is too much for you, then just look for a card with a fixed interest rate. 

However, even a fixed rate credit card can change their interest rate. Keep in mind that if you are late in paying or go over your limit many fixed rate credit cards have clauses in the small print that allow them to increase your interest rate.  Also, be sure to check a credit card company's policy on changing their fixed rate. Some companies can change the rate whenever they want without giving you notice.  You will want to know how your interest rate is being calculated and the policy on giving notice of changes to avoid getting a huge, no so happy surprise on your monthly bill. 

While not specifically about the APR, another cost to you, if you intend to carry a balance from month to month, is how a credit card calculates its finance charges.  Most credit cards use an average daily balance. That is they total your daily balances and then divide the sum by the number of days in your billing cycle and base the finance charge on the final figure.  However, there are some credit cards that will divide the total of your daily balances by the number of days in two billing cycles which means higher finance charges.  While that is good for them, it would not be the best credit card for you.  Be sure to read the fine print about interest rates and finance charges before you apply for a credit card.

Getting back to the annual percentage rate, there are a number of credit cards that offer low interest rates.  When looking for a low interest credit card, there are a number of points to consider.  First, if you find a credit card that is offering a really low interest rate, you want to know what the trade off is going to be.  Most times when a credit card offers a good deal in one area they compensate for it in some other way.  For example, a low interest rate credit card could have a higher annual fee or not offer rewards and incentives.  Be sure that a few extra interest points are worth the trade off.  You may not mind paying an extra percentage point of interest if you get really good travel rewards and you are a frequent traveler. 

Also, most credit card companies will offer a really low or even zero percentage interest rate in their advertising.  This is another situation where you need to really read the small print.  That zero percent interest rate is usually an enticer to get you to sign up for the credit card and in the small print it has an expiration date.  What you really need to know is how long the how rate is valid for and what the APR will be after the honeymoon is over. 

If you already have a credit card with an APR that stings your wallet, there is still hope for you.  You know the phrase: "the squeaky wheel gets the oil."  Well, use it.  Try calling up your credit card company and asking for a lower interest rate. They just don't give it away to everyone, but those that ask often receive.  Just remember to be polite, explain that you like their credit card but need a reduction in the interest rate to continue using it, and be persistent.  If you don't get what you want the first time, then call another day.  A different representative may be more agreeable or ask to speak with a supervisor.  Many times they will give you a rate reduction as an incentive to keep your business.

EASY CREDIT CARDS TO GET APPROVED FOR

The benefits of having a credit card in your wallet are extraordinary.  It provides security, knowing that you have financial assistance for any situation.  It means that you can meet an unexpected expense.  It also means you can splurge or have a night out, every now and then.  Yet, the responsibility of credit cards can also be extraordinary.  There is a bill that comes every month that has to be paid on time.  Paying only the minimum amount due can mean poor credit ratings and higher interest rates.  Not managing your credit in a responsible way can mean a lifetime of debt and difficulty obtaining credit in future situations.  If you maintain good credit then the process of getting approved for a credit card is super easy.

• Apply for a credit card where you have your checking and savings account.  Since you have a financial history with them it will count in your favor when trying to get a credit card issued by them. 

• Apply for a credit card that has the benefits and/or rewards best suited to your needs.  If you have a good credit history, then getting approved for a premium card will be an easy process.  Just use one of the many websites on the internet that review credit cards and do side by side comparisons of cards suited to your needs to pick the best one. 

For many people though the credit card process has become more cumbersome due to bad credit history.  Most people start their credit journey with the best intentions.  They get their first card and use it for only small purchases and pay the bill on time in full.  Then, for some the temptation to spend takes over and they run up a large amount of debt they can't afford to pay in full each month. 

Or, some people, no matter how responsible, incur a large credit bill due to an emergency expense (such as a car repair bill), or they can't pay the bill due to a loss of income.  Even the best intentions can leave you with credit problems that seem insurmountable.  Still, there are credit cards that are easier than others to get approved.

• Apply for a credit card that is not one of the "best" rated cards.  When you do an internet search for credit cards, often the first one listed in a review list will be the most restrictive to bet approved for.  Instead, try applying for a card that is listed a little further down on the list.

• Apply for a credit card that has a higher Annual Percentage Rate (APR).  Just be aware that some of these credit cards can have interest rates as high as 25% to 30% and even higher. Credit card companies charge these ridiculous interest rates to provide themselves some security since they are dealing with an applicant that has a higher risk of not paying.  The extra interest rates guarantee they will make money no matter what happens.  It will cost you more but if used correctly it can help you improve your credit history.  Just remember to only make affordable purchases; that means purchases you can pay in full when the bill comes to avoid the high interest rates. 

• Apply for a credit card with a very low credit limit.  Some of these cards can have a credit limit as low as $250 which doesn't allow for large purchases; but, it does allow you to rebuild your credit rating.  With these types of cards you need to be aware of any extra fees they charge.   Often, they will charge a high annual fee, an enrollment fee, a processing fee, and numerous other fees.  They offer to charge the fees to your card and by the time you actually have the card in your possession you will only have $50 or less available on your credit limit.  Essentially, you start with a $200 plus debt to be paid.  Still, if you are desperate for a credit card this is a viable option.  And, if you pay the bill and keep your card in good standing for a period of six months you can request a higher credit limit and even lower fees or interest rates.  If they won't do it, you may have built up your credit enough to qualify for another credit card with better terms.

• Apply for a secured credit card.  This will require you making a deposit as collateral and your credit limit will only be as much as your deposit.  But, it will give you available credit when needed and work to rebuild a bad credit history.

While there are credit card options that can be easy to get approval, the process of rebuilding your credit is not easy; but, it will always be worth it.

CREDIT CARDS FOR PEOPLE WITH NO CREDIT HISTORY

Having no credit history can actually be a mark against you in the world of credit cards. While you have not run up enormous debt or missed payments, you have also not proven that you can manage a credit card responsibly by paying your balance due on time. 

For credit card companies, a person with no credit history is a giant question mark – a virtual unknown.  They use the information from the credit reporting bureaus to determine a person's level of risk when considering them for a credit card.  If you have no credit history then you have no information on record for them to consider.  They have no way of knowing what kind of financial sense you have.  Still, there are options for obtaining a credit card when you have no credit history.

Before you even try to get your first credit card, you should understand how credit operates.  It will help you in trying to get a credit card and help you in building a good credit history.  The first thing a credit card company considers when reviewing an application is the person's credit score.  A credit score is a point value that the credit reporting bureaus assign each person.  A credit score ranges from 600 to 800.  A person with no credit has a score of 600 not because they have practiced bad credit habits but because they have no credit activity.  The better a person's credit activity the higher their score.  Understanding their scoring system helps you realize that good credit is something earned, not just some unrelated number assigned to a person. 

Likewise, a person with bad credit practices is penalized with a low credit score.  Therefore, getting approved for a credit card is the first step towards building up your credit score.  The next steps are based on your ability to use your credit card wisely.  Using a credit card wisely and building a good credit rating and history will help you beyond the world of credit cards.  Good credit card practices can help you get approved for other forms of credit, such as auto loans and home mortgages.  Good credit ratings can also qualify you for lower interest rates on these types of loans. 

Obtaining a credit card with no credit history will most likely have some extra requirements beyond the standard credit card offered to those with good credit.  Just consider the following three issues when shopping for a credit card:

1. APR – Most credit card offers to someone with no credit will have a higher interest rate than the industry standard.  Some of these interest rates could be as high as 30%.  Just remember if you only use your card for small purchases and pay the bill in full on time then you won't be buried by high interest rates. Just use the card as a tool towards the goal of building good credit.  Once you have raised your credit score you can obtain a credit card with lower rates.
2. ANNUAL FEES – For someone with no credit history, an initial credit card offer will require paying an annual fee for use of the credit card.  These fees normally average about $50.  Be watchful for cards whose fees greatly exceed this norm. 
3. CREDIT LIMITS – A beginning credit card will usually have a very low credit limit. The limit can be as low as $250.  This low limit protects the credit card issuer if the applicant turns out to be a bad credit risk.  However, good credit practices can mean that after six months you can request and usually receive a credit limit increase.

There are numerous credit card offers on the internet that consider those with no credit history.  You can try for an unsecured card, a secured card, or a bad credit credit card.  The following five credit card have offers that seem favorable towards those with no credit:

• Capital One Secured Master Card
• First Premier Bank Classic Credit Card
• HSBC Bank of Nevada's Orchard Bank Visa Card
• HSBS Bank of Nevada's Orchard Bank Classic MasterCard
• Centennial Classic Credit Card

These are not the only financial institutions that consider those with no credit history for credit cards.  They are just a starting point for finding a credit card that will help a person with no credit history develop some positive credit.  If these offers don't appeal to you or meet your needs, then continue shopping around and find that card that meets your needs and is willing to give you your chance to start on the road to having a good credit history.

BEST CREDIT CARDS TO HAVE

Today's credit cards are not your momma's credit cards.  It used to be that you applied for credit and, if approved, you got a little plastic card in the mail.  You used the card to pay for purchases and then got a bill once a month which you could pay in full or installments (with interest of course).

In more recent times, credit cards have evolved.  Long gone are the days of just two, three, or four credit cards. We started out with Master Card, Visa, and American Express.  Then, along came Discover.  That was pretty much it for major credit cards. Then, banks jumped into the arena and started issuing credit cards.  The market got competitive and soon credit card companies soon found they had to offer "extras" to compete for customers.  Now, there are literally thousands of credit cards to choose from and the process of choosing just one—the best one---can be daunting. 

Before you even start to weigh your options you whittle down your choices, you need to do a little self-discovery.  There are several points to ponder about why you need a credit card, how you will use a credit card, and what type of credit card will best meet your needs. 

You need to ask yourself what is the primary reason you need a credit card and how will you use it. Notice the word need?  You need to consider if your attempt to get a credit card is for a needful purpose, like emergencies.  A lot of people say they are going to only use it for emergencies, but then whip it out to pay for every purchase from groceries, to gas, to that fast food at the drive thru. You need to realistically predetermine what you want the credit card for and how you will be using it.  This really effects what type of card you should get.

 If you really are going to use it only for emergencies and pay it in full whenever you have a balance, then interest rates are not an issue and a card with no annual fee would be best for you.  If you are going to use it to pay for everyday purchases and carry a balance, then you certainly want a card that has low interest rates. In addition to low interest, the best credit card for you will be one that offers a high credit limit.  This would be the best credit card for you because you don't want to max out your credit card or hover just at your limit every month; doing that can cause your credit score to take a nosedive.

If you are going to use a credit card for most purchases then consider a credit card that offers some rewards or incentives for your spending.  To remain competitive many credit card companies are offering these "extras" to entice customers to pay for purchases with their credit cards.  Some cards offer points for every dollar charged.  These points can then be redeemed for various freebies and discounts.  Some of the most popular points offers are for travel—with deep discounts on airlines tickets, hotels, and rental cars.  If you travel frequently by air, then the best credit card for you may be one that offers airline miles as an incentive to use your credit card to pay for purchases. 

Also, some credit cards have frequent flyer rewards.  If you travel a lot then this may be the best credit card for you.  Your flight miles can earn you bonus points towards other travel related rewards.  If you are not much of a traveler, then such credit cards would not be best for you.  You may want to consider a credit card that offers cash back incentives.  These cards offer you money back for every dollar you change to their credit card.  If you plan on using your credit card to pay for most of your purchases, then a cash back credit card would be the best choice for you.

There is no one best credit card for everyone!  Be wary of any advertisement that makes that claim.  The best credit card for any individual is the one that best fits their spending habits and suits their lifestyle.  A person who doesn't travel doesn't need to rack up thousands of free airline miles. And, a person who is only going to use the card for emergencies doesn't need to pay exorbitant annual fees. But, someone who is going to use their card everyday may want to pay a higher annual fee in exchange for a low interest rate. 

The best credit card to have is the one that best fits your needs.  And the only way you will know which one is best for you is to be aware of your expectations and then match those with a card whose offers best meet those needs.

BEST CREDIT CARDS FOR COLLEGE STUDENTS

Almost every major financial institution that deals in credit cards has a credit card or multiple cards designed with college students in mind.  The credit industry recognizes a student's need for credit.  Students need credit for travel, living expenses, security, and, of course, class supplies.  There is also the desire of students to have their very own, very first credit card. 

Nothing makes an eighteen year old feel like they have crossed over the threshold from teenager to adult than to apply for and be granted a credit card of their own.  With the credit card companies eager to sign up students and students eager for their own credit card, the whole process can get out of control. 

 A student should make a decision to have only one credit card during their college years. A single credit card will suffice for all your expenses if used wisely.  A student shouldn't be talked into applying for a credit card on the spot because of some slick salesman on campus or the free merchandise they are offering.  Ask for literature about the card.  If you have set a goal of only one credit card then you will be less tempted to apply for every card that is offered to you. Take the time to research which credit card is best for you. One of the best ways to research credit cards is on the internet. 

There are many websites that offer reviews and comparisons of various credit cards.  You can search for credit cards aimed at college students as these would be easiest to obtain.  Then, pick out a few that meet your needs and most websites offer side by side comparisons.  This will allow you to see what a credit card offers and does not offer as compares to other cards. Then, and only then, you can confidently apply for the credit card that best meets your needs. 

There are certain features that a college student should pay attention to when researching credit card options.  First, and most important, is the APR, or annual percentage rate.  This is the interest you are going to pay on any balance you carry.  Many cards will offer a zero percent or very small interest rate in their initial offers.  However, that rate is usually an introductory rate and after a designated period of time the rate will increase.  This increase could be the average of most credit cards anywhere from ten to twenty percent; but, it could also increase to 25% up to 29%.  That means you could end up paying more in interest than the original purchase.  Second, you want to read the terms of the credit contract for fees.  You want a card that doesn't charge an annual fee, or an enrollment fee, or any other fees that strictly mean money out of your pocket and pure profit for the credit card company. 

Finally, you may want to consider a card with rewards.  Just be aware that a card offering rewards will generally have a higher interest rate.  If you are confident that you will use your card prudently and pay the entire balance every month, and then interest rates don't need to be your foremost concern and you could opt for a credit card with a rewards program.  Some student credit cards that have reward programs are:

• DISCOVER -- offers cash back rewards when you pay your balance in full every month.  That means you are building great credit history, have no debt hanging over your head, and getting a little money back in your pocket. 

• CITI DRIVER'S EDGE CARD -- This credit card for college students offers rebates that can be used towards the purchase of an automobile.

• CITI mtvU PLATINUM SELECT CARD – offers multiple points for each dollar spent in specific retailers and one point per dollar in all other spending.  It also rewards good students with 2000 points twice a year for the cumulative GPA.  Finally, it offers 25 reward points each month that a student exercises good money management.

• CITI FORWARD STUDENT CARD – This card also offers reward points for good credit behavior.  You receive 100 points each month that the bill is paid on time and remains under your credit limit.  If you elect for paperless billing and use the card responsibly for three months you will earn 8000 points.

If you are someone who has control over impulse spending and plans on paying your credit card bill in full on time, then a rewards program may be your best choice.  It gives you incentives to use your credit wisely and the best reward of all will be a solid credit history and respectable credit score to start your post college life.