Mega Credit Cards

Obtaining A Credit Card – With A Less Than Perfect Credit History

If you have had difficulty keeping up with your bills, you can rest assured you are not alone. Many people have run into trouble or a shortage of cash flow from time to time that has resulted in the inability to make all of their payments in full and on time. However, just because you dont have a perfect credit history does not necessarily mean that you will be unable to obtain a credit card. Its no surprise that a person with a low credit score will have more difficulty and less options when trying to get a credit card in their name, but it is not completely impossible because creditors do take more than just your credit score into consideration when deciding whether or not to give you a credit card. The important thing to remember is you do not want to apply for every credit card out there- every time you apply for a credit card, you are further hurting your credit rating. When you have a low credit score and a poor credit history, you need to do your research before you start applying, and only apply to the handful of credit cards that are designed for individuals with a less than perfect credit history to make sure you limit the number of credit inquiries that are placed on your credit report.

When a credit card provider is deciding whether or not to extend credit to an individual, the lenders take several things into consideration. The credit score is always a factor, as is your overall credit history of how many times youve made late payments, and how much credit you currently have available to you, and how much debt you currently owe. In addition to these issues, a credit card company will also consider the length of time that the individual has been employed at their current job, and will look favorably on people who have held a steady job with a decent income for a long period of time. If your debt to income ratio is manageable, meaning you make enough money to comfortably pay for the amount of debt you currently owe, sometimes a lender can still extend you credit even though you have made late payments in the past.

Chances are, if youre working to improve your credit score for your future, youre sending as much money as possible to each of your creditors each month as you are trying to pay down your overall debt. Because of this additional money being sent out, there will be less money available to you on a regular basis, and having a credit card can give you some security in the event of an emergency. What happens when your car breaks down, or a health issue comes up and you just dont have the money to pay for it because youve been sending all your extra money to each of your creditors? Having a credit card can be the security you need for these emergency issues. Credit cards for individuals with poor credit histories will almost always carry a higher interest rate than a traditional credit card, but the benefits of having a credit card for emergencies, or to use as a second form of identification, or even for renting an apartment make having the credit card advantageous over not having the card at all. Some landlords may require a credit card be on file in the event you are late with your rent payment, so that they have the additional security of knowing they can get their money by billing your credit card.

The most popular option for people with poor credit histories is to obtain a secured credit card. A secured credit card allows the cardholder to make a cash deposit on the card, and then whenever the card is used, it deducts the amount from the amount of the deposit you made. Its much like a bank debit card, but a secured credit card deposit will earn interest, and help earn money when you arent spending with the card. In addition, as you continue to make deposits to the card to cover your purchases, you are helping to improve your overall credit score.

The Competition Commission one of the governments watchdogs, has at last moved to shame credit cards in to cutting their charges. The long overdue move comes after the Commission concluded that the credit card industry was overcharging customers between 55 and 100 million each year through excessive interest rates and other charges. And this has been going on for a least 3 years!

The main culprits by far are store cards where interest rates are as high as 30.9% – even though the Bank of England’s base rate stands at just 4.5%. The worst culprits were TJ Hughes and the Faith Card followed by Owen & Owen. You can find them heading the Table of Shame shown below in this article.

The commission has also come down on high penalty charges for missed or late payments and Payment Protection Insurance. Average penalty charges are currently 15 per event but the Commission is also right to argue that these charges are excessive.

As for Payment Protection Insurance, the Commission has joined the consumer body Which, the National Consumer Council and indeed the Financial Services Authority in concluding that whilst this insurance can be a good idea, credit card operators have abused it. The Commission has therefore decreed that Payment Protection Insurance must no longer be sold in a combined package with a credit card; it must always be purchased as a separate stand alone transaction. That’ll be good news for the Internet where many of the cheapest Payment Protection Insurance deals can be found. With premium savings of up to 60% in comparison with credit card and loan packed arrangements, business on the Internet will flourish.

So what do the new rules from the Competition Commission say? The five main changes are:

If a credit card charges more than 25% interest, it must carry a prominent warning that there are cheaper ways to borrow. This warnings must be displayed on every monthly statement.

The interest rate and penalty charges must me clearly displayed on the front page of each monthly statement.

The monthly statement must warn of the consequences in terms of higher interest charges, of just paying the minimum monthly repayment.

Credit Cards must offer every customer the option of automatically clearing their monthly balance each month by direct debit. These direct debits would avoid any possibility of interest charges and late payment penalties.

Credit Card operators must not sell Payment Protection Insurance in a combined package with credit cards. The insurance must be sold as a separate and optional transaction that enable purchasers to see the true cost.

These new rules seem destined to shame retailers into slashing their charges that’s not to say that 25% pa interest is a snip! Main line credit cards issued by banks are currently charging around 14% to 18% and we think that’s too high!

Indeed, between 80% and 90% of store cards held by some 11.5 million customers charge more than 25%. But some retailers have jumped the gun realising that their sky-high charges couldn’t last forever. Three store cards have already taken steps to trim back. Harvey Nichols has cut their interest from 28.5% to 21.9%, River Island has trimmed down from 29.9% to17.9% and Monsoon from 29.9% to 18.9%.

But who are the bad boys? Here is our Table of Shame:

TJ Hughes 30.9%
Faith Card 30.9%
Owen & Owen 30.7%
Burtons 29.9%
Dorothy Perkins 29.9%
East 29.9%
Evans 29.9%
HMV 29.9%
JD Sports 29.9%
Kwik Fit 29.9%
La Senza 29.9%
Laura Ashley 29.9%
Miss Selfridge 29.9%
Russell & Bromley 29.9%
Ted baker 29.9%
TopshopTopmam 29.9%
Wallis 29.9%
Warehouse 29.9%
House of Frazer 29.3%
Bhs Gold Card 29.0%
Habitat 29.0%
Oasis 29.0%
Harrods 28.9%
Fenwicks 27.9%
Selfridges 27.6%
Bentalls 27.2%
Jaeger 27.1%
B&Q 26.8%
French Connection 26.8%
Argos 25.9%
Homebase 25.9%
New Look 25.9%

Note: Some of these cards do offer lower interest rates for payment by Direct Debits. Source: Competition CommissionMoneyfacts March 2006

These credit cards are operated by a number of large finance companies, the largest being GE Capital the American giant. The profits are shared between the card operator and the retailer who is often incentivised by being awarded a higher share of the profit if they hit certain key debt thresholds. This has encouraged stores to put immense pressure on shoppers to take cards out.

The Chairman of the House of Commons Treasury Committee, John McFall has accused retailers of putting profit before customers saying If you buy a suit from one of the stores then you would expect the retailer to ensure that it was well made and reasonably priced. These principles do not seem to apply to their store cards.

Lets all hope that the action taken by the Competition Committee does the trick!