Unsecured Credit Cards

Are Unsecured Credit Cards Right for You?

Few people have managed to escape the wrath of the Great Recession unscathed, and among the casualties, some have experienced more hardship than others.

If you are among them, it’s never too soon to start rebuilding – getting your financial house back in order and  reestablishing your credit. As much as the credit world has been turned upside down since the financial crisis, it still offers several options for people who are ready to move out of the shadow of misfortune.

If you have your budget in order and a steady income, your best option may be an unsecured credit card.

What exactly are Unsecured Credit Cards?

An unsecured credit card is nothing more than a traditional credit card – with a credit limit, minimum payment requirements, annual fees – but they are designed for people on the upswing in their personal finances.

Banks are willing to issue credit to people who are committed to rebuilding their credit, but because they consider them to be a higher risk, they attach lower credit limits, higher APRs, higher annual fees and additional fees to the card.

So, it is important not to consider an unsecured credit card as anything other than a vehicle used to rebuild credit, and, perhaps, as source of last resort for emergencies expenditures.

The advantage of unsecured credit cards is that they function just like a traditional credit card.

They don’t require that you place a deposit of your own money as with a secured credit card and they are scored on the same basis of a traditional credit card which gives you the opportunity to build your credit score more quickly.

The disadvantages are that their fees and APRs can be very high, but if you shop carefully, you should be able to find cards reasonable priced. In the better cards, you can expect to see annual fees around $60 to $75, with APRs in the high teens to high twenties.

Some issuers may offer a six month 0% introductory rate but they are attached with a short leash in the event of a late or missed payment. Once you establish a solid repayment history and you keep your balance well below the credit limit, you are likely to start receiving offers for more competitively priced cards.