Unsecured Credit Cards

Getting unsecured credit cards is easy for people with good credit history. However, consumers need to beware of scams and hooks before applying for unsecured cards if they have poor or no credit.

What are Unsecured Credit Cards?

This type of credit card works kind of like a loan. Instead of cash up front, you are able to charge items and pay them off later, and if you pay within a grace period, you won’t be charged interest. Unsecured credit cards are offered to people based on their prior credit history and their ability to repay the card. Limits are issued on an individual basis, and the annual percentage rate can rise and fall with the discretion of the card issuer.

Unlike secured credit cards, unsecured cards do not require any collateral or prepayment. The issuer only has the consumer’s promise to pay off the card per contract terms. Because of this, few unsecured cards are issued to persons who have had a poor credit history. Cardholders are given instant access to a line of credit that makes up for cash they do not have on hand; whereas secured cards can only be used for the amount of money kept in the savings account or the amount the collateral (home or car, for example) is worth.

When Not to Get This Card

It may be difficult to get an unsecured credit card if your credit score or history is poor; yet there are offers everywhere, saying that cards can be obtained. Are these offers as good as they sound? Most likely, no. Beware of unsecured card offers that have:

• Low lines of credit (around $300)
• High up-front or annual fees
• No grace period
• Very high interest rates

While unsecured cards often extend higher borrowing limits and lower interest rates for customers in good standing, not all offers are like this. Be sure to read the fine print, especially if you know your credit is not in good shape.

If you have been using a secured credit card and would like to move to one of the many unsecured credit cards, you may be eligible to do so after about six months of proper secured card use. Even after six months, you may want to wait for better offers to come through as your credit is repaired.

Applying for Unsecured Credit Cards

When applying for an unsecured credit card, you will have to provide information related to the following:

• Age
• Current address
• Marital status
• Social Security number
• Home status (rent or own)
• Career
• Annual income

Additional information may be required before the issuer grants approval. Your spending limit and APR will be determined based upon the answers to those questions and your credit score.

In Conclusion

Most companies offer applications online. However, beware of unsolicited e-mail offers that appear to be from MasterCard, Visa, Discovercard or any other company. These types of e-mails often link you to a very similar site in order to steal your credit and personal identity information. Going directly to the company’s Web site, instead of linking from the e-mail, can protect you from “phishing,” a form of credit card fraud.

An unsecured credit card can be a good entry vehicle into the world of credit card usage, or a step-by-step method to rebuilding credit. Consider how you’ll use credit and take the time to fully review the options of this type of card.

[tag]credit-card[/tag]