What Consumers Need to Know About Credit Building Credit Cards

Those with poor credit or no credit, often have a difficult time finding a card to help with their situation. There are credit building credit cards available for those individuals. These cards are used to increase their credit score, so that they can apply for better cards in the future. This also helps them make their first major purchase such as a home or automobile.

Function

The purpose of credit building credit cards is to help those with poor credit and those without any credit. These cards are typically marketed towards those who need to build their credit such as college students or those who had problems in the past. The individual charges their purchases and makes payment every month, which helps build their credit. Some of these cards have higher than usual interest rates because it's the only choice for the card user.

Secured Credit Card

A secured credit card is one option for those wanting to build their credit. This card uses a deposit to place the card in the individual's name. They make one large payment to the company and are then able to use the card anywhere it's accepted. This works similar to a debit card because the amount the individual can charge is limited to what they send the company. When the money runs out, they need to send more if they want to continue using the card.

Unsecured Credit Cards

Unsecured credit cards are often marketed towards those with bad credit, poor credit or no credit. These cards typically have a high interest rate and usually a low line of credit. Unlike secured credit cards, these don't require a deposit by the user. Instead the limit is typically low, but increases as the person continues to build their credit. They may have a membership fee associated with using the card or even charge a monthly fee.

Student Credit Cards

Student credit cards are available for college students and those over the age of 18. They're often offered directly at the school though some students will also see offers arriving in the mail. Established companies like Citibank and Chase do this because they hope to build life long customers. These cards are meant for students to establish credit and build their credit history since many have never had access to a credit card before. However they do often have a high interest rate on the card.

Warning

There are some unscrupulous companies offering credit cards that do more damage than good because those with bad credit often can't get any other cards. These cards have a very high interest rate, which causes the user to spend a long time paying off the card. They may also have a fee such as an annual fee or a monthly membership fee. These cards also usually have a very low credit limit and in some cases the fees may be half or more of the credit limit.