Second Chance Unsecured Credit Cards
A second chance unsecured credit card is often referred to as a bad credit unsecured credit card, or an unsecured card for after bankruptcy. They not only offer the convenience of having a credit card, but can help users with their credit scores as well.
Although many do not realize this, it is possible to be approved for unsecured second chance credit cards despite a low credit score or a bankruptcy record. As the name implies, it is specially targeted for people who need a second chance. So before settling for an secured 2nd chance credit card or a prepaid card, you may want to consider applying for an unsecured credit card as well.
How An Unsecured Card Works
With an unsecured credit card, the credit card issuing company will grant the card user a credit limit for the card. This card works just like a normal Visa or Mastercard, you will be able to pay for goods and services using the card anywhere Visa or Mastercard are accepted. The card user can use the card to pay for transactions up to the credit limit. If the user needs to use the card beyond the limit for a given period of time, they will first have to pay up a portion of, or the full balance owed.
That's an immediate credit line that you can depend on, with the caveat that you are still responsible for paying off at least the card's minimum balances every month. For many, it is preferable to pay the full balance so as not to incur unnecessary high interest expenses. It is also not advisable to use your card up to the limit as it affects your credit score.
Psychologically, having a second chance unsecured card can be a boost, as you know that you have now found a bank or finance company that are confident in your financial standing and willing to extend credit to you.
Credit Rebuilding Benefits
A major practical benefit of a second chance unsecured credit card is that it allows users to demonstrate their credit worthiness to consumer credit bureaus like Equifax and Experian. Activities like paying up on your credit card balances on time will shed a good light on you as a responsible credit card user. The activities are being recorded on the files of the credit bureaus that provide consumer credit scores. It will translate into a better credit score for you in time.
But what happens if you currently have a poor credit rating and have trouble qualifying for a card to begin with? In this case, you could also get help from a credit repair firm to show you ways to raise your credit score.
Note that this rebuilding credit history benefit of an unsecured credit card could still be available with a number of secured second chance credit cards, but definitely not with prepaid debit cards.
Application Fees & Interest Payments Add Up
Any discussion on second chance unsecured credit cards will not be complete without mentioning the high fees and interest rates associated with such cards. Card issuers often consider these cards to bear higher risks, and compensation for that, they impose requirements like application fees and monthly maintenance fees. The interest rates can be very high as well, making it pretty much impractical as a credit line that you can tap into.
The choice of getting a second chance unsecured credit card is most appropriate for an applicant who may have had some credit problems in the past but is now ready to establish a new fresh record. As mentioned, interest rates are extremely high, so it would not make sense to carry any balance beyond the grace period. The main benefits to focus on are these: the convenience of having a credit card for transactions, and the chance to reestablish one's credit score.
As an alternative to a conventional checking account, consider a prepaid Visa card account with no ChexSystems requirements. It works just like a checking account, allowing for direct deposit of paychecks and online billpay (one-time or recurring payments). You can deposit cash into the account from 135,000 retail locations nationwide. In addition, the card can be used anywhere Visa is accepted. Click to learn more: The Perfect Alternative to a Checking Account!