If your credit needs work, your credit and financing options are often limited. As a result, most people in this situation are resigned to accepting whatever credit they are offered, from payday loans to secured credit cards. However, if you spend a little time comparing sub-prime products such as secured credit cards, 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
$35 Waived First Year
Account Maintenance Fee
$15 Monthly ($180 per year)
Credit Limit Increase Fee
Min Security Deposit
With the Orchard Bank credit card, you need to send in at least $200 to obtain a credit limit equal to your deposit. Your deposit will accrue interest in a savings 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 receive 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 the first year whereas Continental Finance charges a $50 annual fee plus $180 in maintenance fees. That is a whopping $230 in annual feeds for a credit card with a $300 limit. When you do the math, Continental Finance costs $430 a year 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 on member feedback if you need a starting point.
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