Are Credit Cards with No Credit Ever a Good Idea?

If you have been thinking about applying for a new credit card, you may have specific goals that you want to accomplish with the card. Some want to use the credit card purely as a back-up option that provides emergency funds when needed. Others want to use the credit card on a regular basis to earn points or to accomplish other goals. Some may even want easier financial management through a credit card. While some will be able to qualify for great terms on a credit card without hassle or concern, others may discover that the only credit card options available to them are those designed for borrowers with no credit or bad credit. You may be wondering if these are a good idea, and it is wise to learn more about these accounts before applying.

Differences With a No Credit Card
A credit card that is opened based on your solid credit rating may qualify you for attractive terms and a great interest rate, and you may even qualify for a rewards program with additional benefits. If you have no credit or bad credit, however, you can expect the account to have higher interest rates and less attractive terms. Rewards programs with these cards may be difficult or impossible to find. Furthermore, you may have a much smaller credit limit with a no-credit credit card account, and you may even be required to make a deposit before opening the account. Often, the credit limit will be equal to the amount of the deposit that you make, but the limit can increase over time.

The Benefit of a No-Credit Credit Card
With so many drawbacks associated with a no-credit credit card, you may wonder what the benefits associated with this type of account actually are. There are a number of benefits associated with them, provided you use them strategically. With this type of credit card, you may be able to make purchases that you do not have funds readily available to pay for. This could help you to avoid late fees and other penalties. In addition, you can use your new account to make regular payments and to establish a better credit rating. Whether you are building a new credit rating or re-establishing a credit rating, this is beneficial for you.

How to Use a No-Credit Credit Card
While there are key benefits associated with using a no-credit credit card, it is important to note that simply having the account open will do little to help you re-build or establish a credit rating. With this in mind, you should make plans to make small purchases with the account on a regular basis and to pay the account in full each month. Avoid making late payments or going over the credit limit. In order to avoid taking on too much debt, it is best to pay the account in full rather than to carry a balance over, if possible. Essentially, you can use the account to teach yourself proper credit management techniques and methods with a small available credit limit, and you can also use it to build a better credit rating. Eventually, you may qualify for a better credit card account, and you can close out this account when you are ready to do so.

No-credit credit card accounts are not suitable for all situations or all borrowers. They do have a number of drawbacks, and you may benefit from applying for a credit card based on your credit rating if you are able to do so. However, if you cannot qualify for a traditional credit card account, it is great to know that there are alternatives available. The alternatives will provide you with the ability benefit from access to a credit card even when other options are not available to you. Take time to explore the options today to determine which type of credit card is suitable for you.