Bad credit card deals targeting those with bad credit
By Lucy Lazarony • Bankrate.com

Imagine a credit card with fees as high the credit line, an eye-popping annual percentage rate, no grace period and stiff late payment penalties.

Now imagine having bad credit or no credit and believing this offer is the best you can get.

"Credit is an important safety net. I would never deny that," says Linda Sherry, director of national priorities for San Francisco-based Consumer Action, a consumer advocacy group. "But if it costs you this much, there has to be a better way to get it."

Experts say many consumers with damaged and no credit are paying much more than they have to for a credit card.

Fees that swallow your available credit
"The fees on these cards can be so significant that it eats up any reason to have one," says Bill Hardekopf, CEO of LowCards.com.

There's a card, for example, that saddles you with charges upon account opening -- a $29 account set up fee, a $95 program fee, a $48 annual fee, a $7 monthly servicing fee and a $20 annual fee for additional cards. Assuming you got the minimum credit limit of $250, the fees would eat $179 of your available credit in the first month, if you did not get an additional card. If you charged more than $71 in the first month, you'd be socked with a $29 overlimit fee.

Hardekopf recommends making a grid as you compare the terms and conditions of each card. Note every fee charged by cards in consideration to determine the best offer.

Next July, new credit card regulations will take effect that limit the fees charged by subprime cards. Fees can't take up more than half of the credit limit during the first year after issuance. Those larger than 25 percent of the limit must be stretched over the first year.

Experts say those with bad credit would be much better off getting a secured card than paying these types of fees. With a secured card, a consumer would make say a $250 deposit and then receive a $250 credit limit.

Many secured cards charge at least an annual fee, so it's a good idea to examine all the fees involved and shop around for the cheapest deal.

For any card you consider, make sure the issuer reports your payment history to the credit reporting agencies. Otherwise, the card won't help you improve your credit score.

Beware credit repair scams
Credit repair scams can be found almost everywhere in the mail, in newspapers and magazines, tacked to telephone polls. They've even migrated to the Internet. But experts warn there is no quick fix when it comes to credit repair. Anything a credit repair outfit can do you can do for yourself.

Experts say the first step to credit repair is for consumers to get copies of their credit reports from the three national credit bureaus of Experian, Equifax and TransUnion and check for errors and omissions. Everyone is entitled to a free copy of their credit report from each of the bureaus every 12 months. Consumers can access them at www.annualcreditreport.com.

Negative, but accurate information can't be removed from your credit report.

Check your credit report
To request copies of credit reports consumers should contact:

• Equifax
  P.O. Box 740241, Atlanta, GA 30374
  (800) 685-1111
  
  
• TransUnion
  2 Baldwin Place
  P.O. Box 2000
  Chester, PA 19022
  (800) 888-4213
  
  
• Experian
  (888) 397-3742

-- Updated: Feb. 18, 2009