Subprime Credit Cards May Look Rally Good but May Be Predatory With High Interest and Fees
Subprime credit cards are usually more expensive than prime credit cards and target those who do not have higher education
There are more distinctions between credit cards than whether they have a VISA, American Express, Discover, or MasterCard logo. Different credit cards give different rewards and incentives to customers based on a variety of factors, such as education and credit history. But be careful. Depending upon your circumstances, some predatory credit card companies may be targeting you to make a quick buck.
Best Customers Get The Best Cards
As you might expect, the better customers get the better credit cards. This means that if you have excellent credit in the eyes of the credit card company, you are able to qualify for the cards with the best rewards programs and the lowest fees and interest rates. Those who don't have the best credit, on the other hand, may only qualify for the credit cards that no one else wants, such as those with no rewards or extremely high interest rates.
Improve Your Credit to Improve your Cards
If your credit isn't that great, the best thing you can do to get better credit card offers and better rates is to improve your credit score. Pay down your balances on high interest credit cards as much as possible before using your cards again, which prevent interest and fees from adding up too quickly. If you must use your cards after the balance has been paid, try to only charge the amount you can fully pay off at the end of the credit card billing cycle.
Easy Cards Might Cost you
Some credit card companies specialize in credit cards for people that have very low credit scores. These companies, known as 'subprime specialists,' create offers that look very enticing to people who really want but aren't able to get credit cards elsewhere. These offers seem great at first, but they allow the credit card company to cash in on those who are already hurting for money. These cards often have high monthly fees and extremely high interest rates, both of which make it difficult to ever get out of debt. When you slip up and make a mistake, you become trapped in ever-increasing debt.
Be Wary of Credit Card Offers Sent in the Mail
If you know that you have excellent credit, you probably already have the credit cards you want. If you have poor credit, on the other hand, you might jump on any credit card offer you get. But if you have poor credit, the credit card offers you receive might be bad for you. According to the Consumer Financial Protection Bureau (CFPB), credit card companies that specialize in subprime customers sometimes send promotional offers to those who don't have higher levels of education, which benefits the card companies. So when you get an unsolicited credit card offer, take the time to look over all the terms and conditions, paying extra attention to the fees and interest rates. These cards usually have multiple high fees and very high interest. You should especially wary if the mailing seems to be rushing you with limited time offers and the like.
Very long card agreements
When it comes to credit card agreements, longer credit card agreements may be a sign of a predatory offer. While each company is different and uses different agreements, credit card agreements that are extremely long and/or confusing can be a red flag. When you see a credit card that has an excessively long agreement with a lot of fine print, you might be better with another card. High fees and interest charges may be lurking in the fine print. According to the CFPB, subprime credit card companies often target uneducated consumers with agreements written at a reading level equivalent to two years of post-secondary education whereas most larger credit card companies write agreements at a high school reading level that are about half as long.
Know all fees
Before signing up for a credit card, it's important to know which fees and charges are associated with the agreement. You might be signing up for a credit card, but you may also get monthly fees, annual fees, high late payment fees, and high interest charges. You don't want to be signing up for a card that has excessive fees, which can trap you in a never-ending cycle of debt.
Check a Credit Union
Whether you have the best credit around or you have credit blemishes that prevent you from getting a good credit card, check with a credit union to see how they can help you. Credit unions are able to get you into credit options that will help you, not hurt you, and that can work towards becoming better off financially.