Posts tagged: credit cards with no credit check

No Credit Check Credit Cards

I’ve always wondered how any credit provider could afford to offer no credit check credit cards. It just didn’t seem possible, given what we all know about how credit is extended. You apply for a credit card, the credit company looks at your income and your credit history, and they decided a) whether to extend you credit, and b) how much to extend. How on earth could they give a person a credit card while completing ignoring the ‘credit score’ portion of the equation?

To answer that question I started doing a little digging, and I found some very interesting facts on no credit credit cards. The reason they’ll give you a $300 credit limit even though you have squat as far as a credit history is their fee structure. This should blow your mind.

I found a table called “Fees for Issuance or Availability of Credit”

Check this out:

Account Set-up Fee (what they’re going to charge the day they give you the card): $29.00

Program Fee (not sure what this means, but I’d guess it has something to do with ‘you have no credit’): $95.00

Monthly Servicing Fee (apparently this is an annual fee that they don’t want to call an annual fee, I suppose because they spread it out over the whole year): $84, paid at $7 per month

So let’s total this all up…and then laugh hysterically at how much they’re going to charge you for your $300 credit limit (okay it might be a little higher or lower, but I’m in the ballpark).

$29 + $95 + $84 = $208 for the first year, and $84 per year after that.

Funny right? Not really.

I guess you could look at this in terms of the ‘cost of establishing credit.’ That does make some sense, and if your long term goal is to buy your own home or even your own car, paying a couple hundred dollars in fees is probably worth it to get your credit rolling.

But make sure you check out alternatives. If you’re a young person you might consider asking your parents to add you to one of their credit accounts for a while. I’m not even saying they should let you use their credit card – just put you on their account so the credit agencies start to get some information about you as a credit holder. Of course, you’d only want to do this if your parents kept their credit squeaky clean. This whole thing would backfire if your parents were making late payments right? ;)

As always, I’ll finish by saying that you should use credit very conservatively and very wisely. Credit card debt is a miserable thing. You don’t need the stress, so stay clear of it.

Credit Cards for People with No Credit

When I was 18 years old I had no credit score and no credit history whatsoever. Without my knowledge, my parents added me to one of their credit card accounts, and as they continued to properly use their credit, my credit automatically improved. I’m not sure most people are as fortunate as I was, and they’re faced with searching for credit cards for people with no credit…and no one to help them out.

The first thing to keep in mind is you have nothing to get discouraged about if you don’t have any credit right now. Credit card companies keep very detailed statistics about how much every new card holder will be worth over their lifetime. It’s in their best interest to extend you credit cards with no credit. Here’s how they’ll do it:

They’ll start you small. Since card providers know what you’re likely to pay in term of fees and interests over the life of your membership with them, they’ll start you out with a limit in the neighborhood of $250 or $300. Enough that you feel like you can actually use your card for day to day living, but no so much that one irresponsible weekend could put you at risk of taking on a balance you have no hope of repaying.  By the way, I’m convinced that every credit card holder will, at some point, mess up and max out his card. It seems to be something we all have to go through just to learn how unpleasant it is.

After you’ve had your card for a while, the card provider will probably bump your limit a little, from maybe $300 to $500, then from $500 to $1,000, then from $1,000 to $3,000… and so on. That’s how I ended up with credit limits in excess of…well, let’s just say I’ve got some high credit limits.

You just want to make sure you’re very careful with your credit cards with no credit. As someone who’s made the occasional stupid mistake with his cards, let me tell you that it’s brutally difficult to get out of credit card debt once you’re in it. Credit cards are best not used at all, but if you have to use them you really want to make sure it’s something you use for convenience and pay off at the end of every single month. That’s a cliche you hear over and over again but it’s painfully true. Credit card debt is literally the devil, and should be avoided at all costs.