Credit Cards for Bad Credit With No Deposit

In the US right now people are using just over 600 million credit cards and this number seems to be on the rise, irrespective of the recent economic recession. The economic downturn has however played a role in many people defaulting on their payments and thereby, joining the increasing group of people with bad credit. These people are looking for credit cards and their need is being fulfilled by credit card companies who are willing to give them credit cards at high interest rates.

The credit card companies stand to make a good profit by giving credit to people who have a bad credit score by charging allocation fees and high Annual Percentage Rate (APR). The average APR on a normal credit card is around 14 percent, whereas on credit cards with no deposit it can go up to 29 percent. On an average, more than 60 percent of Americans have credit card debt and some of them are prime candidates for credit cards for bad credit.

One of the reason people opt for credit cards is to improve their credit rating. People take these high interest rate cards from companies which report to major credit bureaus. People then make the payments of these cards on time to improve their credit ratings. Generally a credit rating below 580 is considered bad, so people opt for these credit cards and make timely payments to better their credit score. Once they have a good credit score and have streamlined their finances they switch to normal credit cards which have low interest rates.

No deposit credit card is not easy to come by, as the lender is at a greater risk of not recovering the money because, of the credit history of the borrower, coupled with the fact that no deposit is required to obtain such a card. You do not need a collateral or financial security for this type of credit card, and in case of bankruptcy or failure to repay the debt, the creditor will have to write off the sum as irrecoverable bad debt.

There are a few financial institutions like First Premier, Aventium, Capital One, Orchard, who give credit cards to people with bad credit score. The rate of interest charged is variable and depends on various mitigating circumstances. The rate of interest depends on the wage of the borrower and credit worthiness.

Some companies also prefer clients who will opt for a wage garnishment clause, which allows the creditor to deduct a certain amount from the borrowers wage. There is a legal process which has to be followed for such a procedure and your credit ratings might suffer due to the wage garnishment clause.

The credit limit offered on such type of cards is also low because of the financial risks involved from the lenders point of view. Some companies will offer a credit limit ranging from $200 to $5,000, and most times there will also be an annual fee associated with these type of credit cards.

Application process is fairly simple with many companies even offering 24 x 7 customer helpline numbers. You just have to fill a simple online application form to apply for the card, there might be a processing fee ranging from $5 to $50, depending upon your credit worthiness.

Before choosing a financial institution for getting credit cards, check their APR and other annual fees. If you already have a bad credit history, it is advisable to carefully consider your current financial situation before going in for a high interest rate credit card.