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Second Chance Credit Cards: Fees Associated With These Cards

Second chance credit cards offer a way for anyone with bad credit or no credit to get a credit card. However, they usually come with lower credit limits and fees. It is important for anyone who is caught in a bad credit situation to consider the terms and fees offered before applying for and using a card. In this post, we will go through the various fees associated with these 2nd chance cards.

Application Fee. This is a payment charged to a card holder while processing his/her application. This may also be called a Processing Fee. This is charged on both unsecured and secured card applications and varies from $10 to $50 every application. It could be avoided off by asking the credit card company or simply apply for a credit card without this kind of fee. But take note that it cannot always be done especially when it is already a policy of the bank or firm.

Annual Fee. From the word itself, annual, it is a yearly charge paid by a credit card holder for the privilege of being one and having the opportunity to avail the service. It is like a service fee for the creditor for a year’s service to the card holder. Not all cards have this kind of fee attached to it but it is mostly related to second chance or subprime credit cards, whether secured or unsecured.

 

 

Annual fees range from $25 to $300, depending on the credit card offer. There are instances that this can be avoided in the first year of being a credit card holder. It is sometimes waived simply by asking the card company to dismiss the fee.

Monthly Fee. It is the same as the annual fee, just that the total amount per year is divided into twelve parts (equivalent to twelve months of payment) so that the card holder wouldn’t find it hard paying the whole amount. The amount is equivalent to the annual year charge of the bank or firm divided by twelve.

Security Deposit. Security deposits are charged to secured 2nd chance credit card holders and be used as collateral for his/her account. The amount depends on the bank, but it is usually 1 to 2 times the monthly credit limit. Sometimes though, depending on the card offer and your credit score, it can be a fraction of the monthly credit limit.

Annual Percentage Rate (APR) and Finance/Interest Charge. APR is the annualized interest rate for balances held on your credit. This will affect the monthly finance charges for balances carried on your credit card, beyond what you owe for the original purchase made. Interest rate payments can add up quickly, especially due to the high interest rate levels of credit cards for bad credit.

Finance charges can usually be avoided if a card holder should pay off the entire balance of the last statement period before the payment due date. How finance charges are calculated can differ from card to card, so make sure to read through the terms.

Before using a credit card deal, a person should first know the interest rate the bank offers for that specific deal. With unsecured second chance credit cards, the rate usually ranges from 25% to as high as 60%. For secured credit cards, the rates are lower, ranging from 10% to 25%. Sometimes, you can even find deals with a 0%. You may not be able given the exact APR rate until your application is processed, but card companies can always provide a possible range so you can get an idea. When looking into APRs, make sure to know if they are introductory rates that will last for a few months, or if they are long term.

Balance Transfer Fees. This is charged to a credit card holder once he/she decided to transfer his/her balance to another credit card company. It usually ranges from 1-3% of the amount transferred or a minimum of $5 - $10. It can only be avoided when the card company extends a special offer. This is applicable for unsecured credit cards.

Late Fees. It a payment that can be found in all bank or firms. This is charge to a credit card holder once he/she failed to give the full amount he/she should pay for a given deadline. The fee ranges from $25 dollars when you have no records of late fees for the past six months and up to $35 if you have.

Returned Check Fee. This is a fee charged to a credit card holder when a check he/she paid to the bank or firm is returned. This will happen when he/she didn’t have enough funds in his/her bank account to cover the bill he/she has. Usually, all cards have this kind of fee and ranges up to $35. A card holder should always make sure that he/she has enough funds before paying so he/she may not encounter this problem.

Top Three Credit Agency Reporting. While not a fee, this is a term that second chance credit card holders should look into when deciding on which card offer to go with. Your monthly credit card usage activities should be reported to the top 3 consumer credit monitoring agencies Experian, Equifax and TransUnion.

By using your second chance credit card in a trustworthy manner, you will be building credit worthiness and increasing your credit score over time. Through discipline and commitment in making your payments on time, rest assured credit card holders with bad records can get fairer deals in the near future with their card company and say goodbye to all the fees associated with bad credit credit cards.

When looking into secured or unsecured second chance credit cards, make sure to take into account all the fees and charges that you will be accessed with. Do take time to compare what various companies charge for granting you the card. A card offer that has lots of high fees attached to it raises a red flag. Before you apply for the card, do some research and comparison shopping to ensure that the card offer is fair to you.