When Bad Credit Pays Off

Posted by: Michael S. | Jan 03,2008

Did you realize this – if you pay off your bill every month in full, it doesn’t necessarily matter if you have a credit card with bad terms.  That sounds slightly crazy, but it’s true.  Much of the emphasis on this site is about getting credit cards with low interest rates and reading the fine print to avoid fees.  The important thing to realize is if you manage your cards effectively, you won’t have to pay high interest and fees if you pay off your balance in full every month.

What this means is if you’ve got bad credit, you don’t necessarily have to wait to have a spotless credit rating before applying for another card.  You could apply for a bad-credit credit card with the aim of paying off that credit card in full every month.  This could even be the case if you’re already carrying a balance on another card.  

Generally, it is not totally recommended to have several cards open at once, because the overall amount of your credit limit can lower your rating.  So if you have three outstanding cards, this could make you less attractive to new lenders because you are in potential jeopardy of going into debt.  That sort of flies in the face of what I’m saying, except if you pay off one of the cards in full every month.  What you will gain is a new credit account to add to your credit history, which can actually offset what is lost through carrying a higher overall limit.  Eventually, you may be able to negotiate for better rates for that card when you’ve proven to be a responsible and timely cardholder.  

The trick, of course, is to pay off at least one of your credit card bills in full.  If you get a bad-credit credit card and carry a balance you’re going to be stuck with shelling out money for interest.  Most often (too often) this is how people use credit cards.  But if you can manage to pay off your bill in full every month you’ll avoid interest and fees and help elevate your credit rating by responsibly paying off a bill.  

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