In order to establish a good credit score, you have to get credit and have positive credit activity. In order to get credit, in most cases, you need a good credit score. SO it can be challenging to get a credit card to show positive credit activity when you can’t qualify for credit because you have no credit. I know that made my head hurt as well.
So, credit beginners would start with secured cards. With these high fees, high-interest rates, and low credit limit cards, you have to put up anywhere from $200 to $500 as a deposit, which the bank or credit card company holds for you while that card is open.
Web Bank is changing how all of that works by offering a credit card for people with no credit/ bad credit. It is called the Petal Card. (Link) It is a no annual fee card that doesn’t require a deposit. However, you need to know a few things before you rush out and apply.
Since this is for people who have had trouble managing credit or for people with no credit experience, the credit card companies depend on a few things happening.
First, they depend on the consumer to make mistakes and make late payments. If you make a late payment, the first penalty is $29. The second one is $40. As a beginner with credit, you have to know that it is crucial to make payments early before they are due. If they have a penalty schedule where the penalty goes up rather than being the same, whether it is your first time or your 10th time, they are counting on you being late with payments.
Second, they depend on you either giving in to the temptation to purchase something that you could live without and paying over time or run a balance because you are having trouble making ends meet. The interest rate range on this card is 19.99% to 29.49%. If you have no credit, my guess is you will be at the high end of that range. With interest rates as high as almost 30%, you cannot afford to run a balance.
Bottom Line – this could be a promising avenue for consumers with no credit or bad credit to start building positive credit activity. That is the positive side of the credit card. Incidentally, positive credit activity is created when you use the credit card to pay for things like gas, groceries, etc. and pay off the balance each month.
Then there is the dark side of credit. If you were to get this credit card, you would have to make a pact with yourself that you will never use this as a high-interest rate loan and pay the balance off each month. It is strictly for creating positive credit activity. Remember, Credit card companies count on you making mistakes. That is how they make money.