Credit News

Comparing Credit Cards Is Vital With Poor Credit

by Staff Writer, Credit Karma

March 14, 2009 | 0 comments

If you have poor credit, your credit and financing options are often limited. As a result, most people with poor credit are resigned to accepting whatever credit they receive from payday loans to secured credit cards. However if you spend a little time comparing sub-prime products such as a secured credit card, you can save hundreds of dollars in processing fees, account fees, and interest.

Below are the features and costs of two credit cards in the market, one is the Orchard Bank Classic MasterCard and the other is the Continental Finance Classic MasterCard. Both are marketed to subprime users looking to rebuild credit.

	Orchard Bank Classic MasterCard	Continental Finance Classic MasterCard
Credit Target	Sub-Prime	Sub-Prime
Application Fee	None	$200
Annual Fee	$35 Waived First Year	$50
Account Maintenance Fee	None	$15 Monthly ($180 per year)
Credit Limit Increase Fee	None	$25
APR	7.90%	19.92%
Min Security Deposit	$200	None

With the Orchard Bank credit card, you will need to send in at least $200 to obtain a credit limit equal to your deposit. Your deposit will accrue interest in a saving account and will be returned to you upon closure of the secured card provided you have paid your balances. The Continental Finance credit card requires you to pay $200 in processing fees, $50 in annual fees, and $15 in monthly service fees. That is $265 in fees before you even received your card. With the Orchard Bank card, your security deposit is refunded whereas with the Continental card the fees are lost. The Orchard Bank credit limit is equal to your deposit and the Continental Finance credit limit is $300.

When you compare the annual fees, Orchard charges $35 a year and they waive this fee in year one whereas Continental Finance charges a $50 annual fee plus $180 in maintenance fees. That is a whopping $230 in fees annually for a credit card with a $300 limit. When you do the math, Continental Finance $430 year one for a card with a $300 limit whereas Orchard Bank charges approximately $200 that they return when you close the account in good standing. This is a perfect example of how two products targeted to the same people can vary drastically in cost.

The bottom line is that just because you have bad credit, it doesn't mean you should have to pay exorbitant fees. Be informed and make sure you compare products before you make your next financial purchase. We have a list of recommended credit cards based member feedback if you need a starting point.

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USER COMMENTS(15)

justone21
Apr 2
9:51 pm

i think this is crap that you have to go in to debit just to get your credit score up and in good standings

CK Moderator

That is a misnomer. You need to use credit to have a good score but you don't need to go into debt. For example, using credit cards and paying them off in full each month is a perfectly good way to build credit without going into debt.

livinfree
Mar 24
12:39 pm

I think it's just plain crap that you have to go into debt and or utilize credit cards just to be able to buy a home or car. Since when is it wrong to pay cash? What benefit is there to getting out of debt? Who designed this ignorant system anyway? You constantly hear get out of debt yada yada but if you do you're penalized. I don't want to pay intrest period. I used to have credit cards but closed them as a conscious decision now I can't get anything decent. It just infuriates me that my life is basically controled by people I can't even call or go talk to. A big huge scam is what I think it is.

CK Moderator

You don't have to pay interest to have good credit but you do need to have a credit history and open accounts.

Credit is not a bad thing if used responsibly. It can be a great convenience if you manage it correctly.

Mike11212
Mar 18
6:22 am

Orchard Bank after 2 years of being with them for me anyway, returned my security deposit with interest (also gave me the option to put it towards my account). 6 Months later they lowered the monthly fee to 19 a month and the interest rate, what started off with a 200 dollar secured credit limit with a 70 dollar anual fee is now a 500 unsecured card with a 19 dollar anual fee.

sylvianurse
Mar 17
8:15 am

what if you've had these particular cards for rebuilding credit and they charge for late fees and such and you just can't get ahead of this creditcard game because they charge 19% or better for lateness also or missed payments and they are harassing people for payment.

CK Moderator

If your goal is to rebuild your credit, you need to avoid late payments. If you don't think you can do that, you should try sticking to pre-paid credit cards. Otherwise you are completely right, it is a downward spiral.

beebopjkm
Mar 16
5:49 am

Orchard WILL charge a fee for CLI...