Credit Cards: Leverage or lepor?

When discussing good or bad credit, invariably the conversation will turn to the role of credit cards. Overall, credit cards are a necessity in today's society. If you wish to do most types of transactions, credit cards are vital to completing the process. You would need a credit card for every purpose from securing a hotel room to renting an automobile. So credit cards are not all bad.

The problem for individuals with bad credit is in how they use credit cards. First, many of the credit cards that target those with bad credit tend to have some of the highest interest rates in the credit card industry. Companies such as Capital One, Orchard Bank (which is a card issued by HSBC) and First Premier are make have huge market share in the bad credit area. They each also have some of the highest interest rates and fees of any card issuer.

Also keep in mind that the fees are also front loaded with many of these cards. Some of the fees in which they charge are a "processing fee, account set up fee, program fee, annual fee and monthly servicing fee". Cardholders of these cards are shocked to find out when they get their first monthly statement that their balance is usually about $125-200 even before they use the card! Talk about robbery!

If your credit has some bumps and bruises, you might not want to acquire one of these cards at this very moment. Allow a few more months of rebuilding your credit (following the strategies provided on this site) in order to shop for a better credit card issuer. Time is always on your side.

In the end, a credit card is only as good as the individual using it. If you are wise in the use of your credit card to secure certain transactions as mentioned earlier, I do not see any problem. The trouble for most people with poor credit usually stems from using a credit card as a substitute when you are out of cash, e.g. dining out, movies, luxuries and pleasure items. If you are that type person; that is not the proper use of a card.