Bad Credit Cards” – What is that?
A bad debt credit card is basically a credit card offered by credit card providers to people who have bad debts. Does this surprise you? Well, don’t let your thoughts run away with you just yet.
Depending on your understanding of what a bad credit card is, you can divide bad credit cards into two categories. The first category of bad credit cards are those that are secured (also known as secured credit cards). These bad credit cards require a guarantee, which means you must open (and maintain) a bank account with the bad credit card provider. The credit limit on your bad credit card is calculated as a percentage of the balance in the bank account you have opened with the bad credit card provider. Typically, this is 50-100% of your bank account balance. Therefore, this bad credit card enables you to spend the amount in your bank account; only the way you spend it changes (i.e., you spend it with the bad credit card instead of spending it as cash). As a result, bad credit cards allow you to enjoy the convenience and other benefits associated with credit cards, even with bad debts. This security is very important to bad credit card providers – after all, how can you trust someone with a bad credit rating.
There is nothing special about the other category of bad credit cards, they are the same cards we know most often; the only difference is the way you get them and the purpose behind getting them. Here, we are talking about credit cards that you use as a debt consolidation mechanism, i.e. to consolidate bad debts (because any debt is bad). Therefore, we can also call them bad debt credit cards. These credit cards work by transferring the balances from your current high-interest credit cards to these bad credit cards with lower APRs (at least for an initial period of time). As a result, these bad credit cards can help you consolidate your debt and get some relief from the higher APRs you are experiencing with your current credit cards.
Some people accept both of these types of credit cards as bad credit cards, while others tend to prefer one or the other. So, what you consider to be a bad credit card is really a matter of personal choice.