You need good credit when making large purchases. The stepping stones in creating a solid credit history will typically begin by applying for and using credit cards. While it can appear that credit cards all come in a single flavor, nothing is further from the truth. Credit cards that are designed for consumers with little credit or poor credit can have numerous fees attached to them. But consumers have multiple options for manageable balance requirements and easy qualifications.
Department Store Cards
Departments stores may have liberal qualifying ratios when issuing consumer credit cards, giving borrowers an opportunity for a fast and easy approval in many cases. These cards will often have higher interest rates in comparison to a more traditional Visa, MasterCard or American Express, but can be a way to obtain a credit card with a limit of $500 or less.
Pay department store cards off promptly each month, otherwise the money saved in not having an annual fee will be negated in interest charges over any extended period of time.
Secured Credit Cards
A secured credit card requires a deposit upfront from a consumer. The typical minimal requirement for a deposit ranges between $200 and $500. Once the card is issued, the deposit amount is equal to her credit limit. While this can begin building credit, you must review all annual fees. Secured credit cards may come with annual fees that can cost as much as $300, nearly negating the purpose of having a credit card.
However, certain banks such as Capitol One offer cards with small deposits and no annual fees for consumers. They also offer online applications and the capability to instantly deposit funds into the credit card.
After having built up a good payment history with your secured card, banks may refund the deposit in full and increase the credit limit over time.
Prepaid credit cards allow a consumer to deposit a fixed amount onto a card with a Visa or MasterCard logo and use that deposit over time as credit. These cards do not require a credit check in order to obtain an approval. The deposit amount does not accrue interest as the borrower is able to charge against the deposit until the deposited amount reaches a zero balance. These cards can be loaded and reloaded with additional money as frequently as the consumer would like.