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Prepaid and Secured Cards
If you currently have bad credit, or you are afraid to get a new card because of the economic instability, you might also want to consider a prepaid card. These are basically debit cards which you can use in place of cash, but also in place of credit. If you want to avoid all of the fees that are typically associated with credit cards, this is definitely the way to go. You can usually find prepaid debit cards with very low usage fees, if any at all, as long as you follow specific protocol. For instance, many will waive the deposit fee if you use direct deposit to get money in your account. Some waive the fee as long as you deposit so much every month. It actually makes sense to deposit as much as you can into these accounts because it doesn't hurt you at all to do so.
If you want to take advantage of a program that is more like a credit card, but you are still wary of over limit fees, you can consider a secured credit card. Secured cards are so named because you are required to make a security deposit on the card before you can use it. It is not a usable deposit, and therefore your credit limit can often be higher than the deposit amount. The security deposit is just an insurance policy for the credit company that just in case you can't make your payments, they do not lose money on your account. This type of card is perfect for people who are new to credit or trying to reestablish good credit as it allows you to take advantage credit card rewards but typically keeps your rate lower.
Rewards Credit Cards
Speaking of rewards, this is the other type of card that people usually consider. Rewards cards always offer you something for using the product. There are some cards that have a standard purchase cash back rate which pays you dividends on things you buy every day. Some cards pay only for specific things, but their rates are higher. For instance, there seems to be more and more cards these days that pay out for gas and groceries, which are things you might typically pay cash for. If you know what your budget is every month, you can easily use your credit to buy these things, reap the rewards, and then pay off the balance every month. You won't pay interest, so it's like getting money back on the same stuff you bought last month.
Of course, you can also get rewards cards for just about anything else. If you tend to shop at particular store more than others, it might make sense to get a store card so you can take advantage of unique benefits. This limits you, however, so you need to be wary that you don't have too many of them. However, if you can find an affiliate card that is attached to a national bank, there may be more flexible rebate benefits along with store rewards.
If you are dealing with financial stress, it might be simply because you have too many liabilities. It is often not how much money you owe, but to how many creditors you must write a check every month. This creates multiple problems. For instance, if you have two national credit cards and three store credit cards, you have to write five separate checks. Five payments means five different due dates, and if you miss any of them they each have their own late fees. What happens if you get laid off or you take a pay cut? If you miss all five payments in one month, you could be behind for the rest of your life.
You can avoid this by using a new balance transfer card. If you have been able to keep your credit in fair standing, you should apply for a 0 interest balance transfer card and consolidate all five balances to your new card. This allows you to reduce the amount of money you are required to pay every month, which means you can afford to pay down the total balance much quicker. Also, if you do miss a payment, you are only assessed one fee, which is much easier to recover from. This interest rate is usually temporary, but you should have enough time to either pay the whole thing off or get it under reasonable amount before the variable interest kicks in, often 6 or 12 months later.
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