Unsecured Credit Cards...An Option for the Subprime and Prime Credit Score Cardholders

When you talk about unsecured credit cards, it simply means that there is not security that is made to obtain the card. You do not make a deposit in order to get the card and this describes the nature of the terms you expect to get. Since, you are considered a risky customer; you are put through a series of fees that you pay because of your bad credit.
If your score ranges from 620 - 659, you are considered for subprime financing and if it ranges between 660 and 720, you are eligible for prime financing option, including credit cards.

There are many limitations and charges that are linked to these low credit unsecured credit cards and this is why it is advisable that you only obtain them when there is no other alternative. In most cases, the credit limit is placed at around $250 but if you prove that you are indeed a disciplined card user who is able to pay balances in time, this limit may be increased subsequently after a satisfactory use.

Advantages of credit unsecured credit cards
The two main advantages of these cards is that they enable you improve your credit score and secondly, they do not require a deposit. Since it is most probable that you are financially in bad shape, by not making a deposit as security against the issuance of the card makes things better. But remember there is a catch in this card. The fees can ruin your financial ability and if not careful, you may dive deeper into financial pitfalls. So when are unsecured credit cards useful?

Because you are in a subprime credit worthiness category, you need to accept your situation and focus on ways to rebuild your tainted credit score. Whereas it will not take overnight to repair your score, by observing certain spending patterns and card-use practises, you can quickly get yourself out of the trap.

The only good thing with unsecured cards for the consumer with bad credit is that the use is reported to leading credit reporting bureaus such as Experian, Equifax and TransUnion.  If you use the card carefully without any delinquencies or late payments of balances, and other bills, you can build your credit history. However, you need to be very vigilant in these aspects otherwise you may get yourself in trouble.

What you must watch out for in unsecured credit cards
For one, these cards are issued to consumers regarded as high risk. If you have bad or limited (subprime and prime) credit score, you may need to get these cards. Similarly, if you have previously filed a bankruptcy case, you also are also considered a risky consumer and you may need these cards.  Whereas the unsecured credit cards are designed for people considered high risk, you may also get a low credit score secured card, which has better terms than the unsecured.

The low credit unsecured credit cards carry high APRs, which could go as high as 60 percent. Besides the APRs, there are also other fees that come with these cards and include an annual fee, which may go as high as $85. For example, First PREMIER Bank unsecured card was attracting an annual fee of $84 as at March 2013 and Centennial Unsecured credit card was attracting the same annual as at this date.

What this means is that, although you do not pay for the security deposit, you end up paying more through annual fees. One thing you need to evaluate is how long you intent to use this card. If you are going to use it more than 5 years, then this could be very costly for you. It is better you consider other options.

In addition, low credit unsecured credit cards also attract account processing fee that can go as high as $39. There is also what is called program fee, which is a onetime fee that is charged on credit card users as a term or condition of credit extension. Moreover, there is also a monthly servicing fee that can amount to $10 dollars depending on the card issuer and when you calculate this amount, you find that you can pay up to $120 per annum.

Last but not least, these unsecured bad credit cards also attract credit increase fee of up to $25. Basically, these fees could really cause a big burden on your credit card use often leading to very minimal benefits. If you are taking this card, basically use it as a way to build your credit score.