There are alternatives to payday loans and other predatory loans | Economic news

Another alternative is a subprime credit card. Subprime credit cards are available for people with substandard credit histories. They usually have higher interest rates, additional fees, and lower credit limits. These can be secured or unsecured credit cards.

With a secured card, borrowers must provide an initial deposit. (Perhaps a relative can provide this deposit, or a tax refund can be used.) The borrower is generally limited to charging only up to the amount of the deposit. The benefit is that it allows an individual to demonstrate their ability to pay on time, thereby improving their credit history and possibly opening an unsecured credit card account. Another advantage is that the fees are generally lower than those of an unsecured credit card for borrowers with bad credit.

US News & World Report recently published an excellent article with the title “Best Credit Cards for Bad Credit of 2017.” The article suggests that the best secured credit cards currently available are from Capital One, Discover It, SDFCU and Credit One Bank.

When applying for a credit card, you should carefully look for the following: high annual fees; initial processing fees; additional monthly maintenance fees; and high APR. For example, the standard APR for an unsecured credit card is around 16.7%; for an unsecured credit card for people with bad credit scores, it can be as high as 35%. For a secure card, the APR could be around 19%. There may be an additional APR penalty of 6% or more if you miss a payment. Know your grace period. You want to avoid a card that doesn’t have a grace period.

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