If your credit is less than perfect, you might be satisfied just to be approved for a credit card. However, if your new card is overly restrictive, it may be more trouble than it's worth. These restrictions can quickly snowball, getting you into debt and hurting your credit score.
Credit Card Fees
Many companies offer credit cards that are specifically for customers with poor credit. However, the fine print in these agreements often notes that the credit card company charges numerous fees for their use. These fees may include annual fees, monthly fees, set-up fees and account maintenance fees, which can quickly increase a balance on your new card. Even if you don't use your card in a given month, you still might be obligated to pay a fee, and if you don't make that payment, you'll incur a late fee.
Low Credit Limits
These fees can be particuarly problematic if you have a low credit limit. This means your percentage of available credit will decrease rapidly, even if you don't buy anything with your card. Your amount of outstanding debt in relation to your credit limits (debt-to-credit ratio) makes up 30 percent of your credit score, so a low credit limit hurts your score if you carry a balance. Also, a card with a low credit limit has limited usefulness in the event of an expensive emergency.
High Interest Rates
People with the best credit scores pay the lowest interest rates, and the inverse is true as well. High interest rates can make it difficult to escape the cycle of making only your minimum payments each month and never paying off much of the principal balance. Even if your interest rate isn't excessively high now, most credit card companies routinely increase interest rates significantly if you miss just one payment.
Eliminating Restrictions
Restrictions on your credit card are a necessary evil if your credit is damaged. However, as you work on improving your credit, you can call your credit card company to determine whether you qualify for a better interest rate, a higher credit limit or a reduction or elimination of card fees. If your current credit card company is unwilling to work with you, shop around. You may be able to find a company that gives you more favorable terms.
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