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Comparing Credit Cards Is Vital With Poor Credit

March 14, 2009

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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.

Comments

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I read that paying off your card every month does not help to improve your FICO score. The advice suggested paying your card down to 30% without going to zero. The effect is called "credit utilization". Moderator, can you please comment?

godwinsg 1 year ago

This is a question that requires a more lengthy answer. We will post something on Q&A in a few days.

CK Moderator

1 to 10% will score you the highest

http://www.creditkarma.com/report

jiju5r33 7 months ago

Does the my rent and my electric bill go towards my credit score?

I pay both my rent and electric bill faithfully but it seems like my credit score is not getting better, can you tell me why this is?

autumnleaves 1 year ago

Generally utilities do not affect your credit score as they are not reported on your credit report. A company called PRBC is trying to build a credit score from these types of payments but it is not used by many of the main financial institutions.

CK Moderator

Rent and utilities do not report your payment history to the 3 major credit bureaus. They will report someone if they don't pay for a length of time and end up in collections.

UltDragon 3 months ago

I agree with the comment from tom jefferson. How should be illegal that companies like utilities don't report to credit bureaus until you don't pay them. Yet you get no credit for all the times you paid or length of service you did pay. They provide services based on your credit; most times charging you a deposit. Someone has to do something about this; it's not fair nor does it make sense to me!

Really, I think someone needs to re-think the credit scoring system; it's your lifetime report card. Even with hard work, your efforts go unnoticed; it's all based on if you have money and whether you pay on-time; if you don't have money, who determines that? It's like you pay twice for the face you are not working! When you loose your job, you have to deal with that and most times, don't have money to pay your credit cards - - With the economy and all, no one has a true handle on how or when they receive money. Most of us work pay-day to pay-pay praying to keep our jobs.

Zeuss 1 year ago

I could not agree with you more. I question the legality anyway, of companies buying and selling personal credit information. Isn't this an invasion of privacy? What gives a company the right to buy and sell information about me, especially when much of it is incorrect?

You're right, new legislation is needed and Washington seems to be working on that.

We all need to keep writing our Congresspeople and pushing these issues.

kelleyking 4 months ago

if my credit score is 491 could i get one of those cards?

chocchoc 1 year ago

Cards like the Public Savings Bank Secured Card are great for poor credit. They key is that they don't have a credit score requirement. Just keep in mind that it will require $379 from you to start. But the card should help re-establish your credit history provided you use the card responsibly.

CK Moderator

if its that low you need a fresh start, contact an attorney

nbirnbaum2 8 months ago

An attorney?? For what?

With a score that low, what you might want to do is ask your parents to add you as an authorized user on one of their cards. Be sure this is a GOOD account with no derogatory comments or late payments. This will help with your average age of revolving credit. They need not give you a card. wait for the acct to post to your reports, and then try for a visa or MC with the bank you use regularly. Even if your parents can't do the AU, go to your bank & talk with one of the financial specialists. Tell them your situation & ask for their opinion on what may be best for you.

BungalowMo 6 months ago

my score is 537 can a get a credit card that is not a "secured"-prepaid card. or should i try and get a almost paid off account back open?

sgrossok 1 year ago

At that credit score it is unlikely that you would be approved for a non-secured credit card. Your local bank or credit union could be worth a shot.

CK Moderator

Try either Capital One or Orchard Bank. If they approve you for a card, it will probably be with a low limit. Hope this helps-good luck.

UltDragon 3 months ago

I have a Citicard that I am about to pay off with my tax refund. Should I close the account and apply for an Orchard card? Should I keep the Citi account as well as getting an Orchard card? What will help my credit score the most? My score is 615 at this time.

cehavens 6 months ago

Keeping your Citi card line open will help your credit score. Closing any accounts will hurt your score as well as applying for a new card because you will be hit with a hard inquiry. If you open a new account, make sure u spread your balance evenly and pay them off each month between the two cards. That should help your score.

CK Moderator

It seems that certain cards get "airplay" here while other cards with cheaper annual fees are nowhere to be found.

Why is that? Or is it obvious...the ones here pay for advertising.

BungalowMo 6 months ago

Bingo!

JohnHoer 3 days ago

I was blessed tohave received a Orchard account after filing a BK in Aug 2008. They allowed me $300.00 unsecured and $39.00 annual fee. But I was never later on any of my accounts, had medical problems. My filing a BK on my credit cards still show no late payments. I refirmed my US Bank and they lowered my credit line but that's Ok. Now Orchard has up my credit line to $500.00 I got this card before I was discharged from my BK. So pay on time, my home was refirmed and I was never late in paying my house note and that showes up on my credit report. Even filing a BK my score is 697 today. So there is hope for us all.

Jesus51 6 months ago

Will this card be a good idea for someone that has a score of 517?

chavonm 6 months ago

I got a capital one card because everyone said it was the best way to build credit. When i signed the contract i was paying and extra fee each month just incase i lost my job they would pay it for 6 months or until i go back to work. I was out of work for 3 months due to sickness and i called capital one to tell them about the dilima and they were the rudest people they said that the contract had no such thing but they were charging me monthy for it so for 3 months the bill wasnt paid well now i have horrible credit thanks to them i would never advise anyone to have a capital one card .

shelliebaby 3 months ago

I totally agree with you chavonm. I have had a Capital One card for nearly 10 years. Until January my rate was 9%. It then went from 9% to 25.4%. I called and they said that the "introductory" rate had expired. I asked them why it went so high, the guy argued with me and said that he would notify his manager and they would back charge me for the 9 years that it was at 9%! He was more than rude! I'm trying to get out from under this credit card. They are awful.

suzannew 3 months ago