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New Credit Card
Getting approved for a can be difficult without a positive credit history working in your favor. It's a Catch-22: To obtain a credit card, you need a good credit history. But to have a good credit history, you need to establish good credit!This no-win cycle can keep people with a non-existent, limited or negative credit history from getting approved for a credit card. But it doesn't have to if you understand the type of available and how to build a good credit history.When it comes to , the type of card you apply for will depend on your situation. If you're a student, you'll, naturally, sign up for a student card. But if you're a non-student with a non-existent or bad credit history, a card that is secured or obtained with a co-signer may be your best option.
With a secured card, you secure the card by depositing cash up front in a savings account or CD. The amount of funds you place on deposit will generally match your credit line. Your card issuer maintains a lien on the deposit account, which you stand to lose if you fail to make timely creditcard payments.While many people have heard of secured creditcards, unsecured or regular creditcards are more common. With an "unsecured" card, the issuing bank has no right to take specific assets of yours if you don't pay your bill. Instead, the bank would have to sue you or force you into bankruptcy to collect.A secured MasterCard or Visa looks just like a regular one, and the law ensures that it has all the same consumer protections. However, a secured card typically carries a higher interest rate. But a secured card can be a good deal because it offers you the convenience of having a creditcard while you work on establishing or rebuilding your credit.
CreditCards with a Co-Signer
With co-signed creditcards, the co-signer guarantees and is responsible for the debt. This means that the co-signing person is responsible for paying the full amount of the debt if the card holder doesn't pay. In fact, when co-signed debt goes into default, three out of four times co-signers are normally asked to repay what is owed, according to the Federal Trade Commission.Furthermore, the issuing bank can attempt to settle the debt without first trying to collect from the card holder. The bank can also use the same collection methods against the co-signing individual, including suing and garnishing wages. If the debt is not paid, it can leave a negative mark on the credit history of the co-signer, as well as the card holder.Despite the risks, a co-signed creditcard can be great tool for helping a friend or relative build their credit history so they can one day obtain a card on their own.