Bad Credit Cards – 5 Major Mistakes You Need to Avoid

In this article, I will expose five mistakes people make with bad credit cards. Unfortunately many consumers with poor credit unknowingly hurt their credit score and waste excessive money on unnecessary fees. Bad credit is a lucrative industry and corporations know consumers are motivated by two major instincts. Fear of not being able to get credit and greed to obtain something for nothing.

Unfortunately consumers with problem credit have fewer choices when it comes to credit cards. Credit card companies assess higher fees and penalties for people with damaged credit so it’s important to make your decisions carefully. If you have poor credit and you’re in the market for a prepaid card or secured credit card, knowing about the following list of mistakes will help you avoid paying unnecessary fees or ruing your FICO score.

1) Non-bank Catalogue Cards

If you receive a pre-approved “gold’ or “platinum” card with a high limit and no credit check required, beware! These cards typically require you to purchase items only from the stores catalogue and scam you into paying merchandise that is overpriced by as much as 50% or more. Also these companies seldom report to the credit agencies.

2) 900 Number Telephone Scams

Beware of these type of advertisements asking you to call a 900 number for a guaranteed large credit line or for “instant approval”. These credit scams are operated by companies who lease phone company lines and profit by charging you higher than normal call costs. Most of the credit cards they offer gouge you with high application and processing fees. Some scams have you call a 900 number to get a secured card but all you really get is an application and a hefty phone bill.

3) Credit Card Insurance

This is just another way for the bank to profit from your account. This type of insurance usually isn’t necessary and extremely overpriced. If you feel you need this kind of insurance, you’re better getting it from an independent insurance agent.

4) Cash Advances

Cash advances amount to nothing more than a high interest loan. Banks can charge you a hefty advance fee and you are charged high interest immediately when you take out the loan. Unscrupulous banks will seek to eliminate any interest free period upfront and for as long as you maintain an unpaid balance. A cash advance check functions just like a credit card advance. If possible, avoid using your credit card for cash advances.

5) “Waive your minimum monthly payment”

is a popular offer credit card companies like to use, especially around major shopping times during the year. Though it may seem that the bank is trying to give you a break from your financial obligations, their main goal is to have you accrue more interest. If you fall for this bad credit card trick, you will end up owing more debt to the bank. Never miss a monthly payment if possible. Your goal should be to get out of debt as soon as possible.

Armed with the right knowledge, you can avoid being another victim of a bad credit card scam. With a little searching, you can find some good secured credit cards designed for people with bad credit. Get one and make your payments on time. This is one of the best ways to help you rebuild great credit.

Author : Bobby Tan is a debt management consultant helping people resolve their bad credit issues. Find Bobby’s reviews of the hottest bad credit cards for bad credit at Bad Credit Card Tips web blog.