Consumers are still spinning from the economic events of the last year and the impact on the credit industry. Lending institutions have adopted much tighter lending requirements and are, consequently, turning away those consumers who appear to pose a higher financial risk. That means that those looking for credit cards for bad credit are having a tougher time qualifying for a new account. Consumers now need to have higher credit scores and cleaner credit histories to be approved for new credit card accounts. Long standing customers are not immune to the new credit standards either, as many have experienced an increase in rates and fees or had their lines of credit lowered. According to a Federal Reserve study, an estimated 45 percent of banks lowered maximum limits on the credit cards of existing customers in the last quarter of 2008. One of the major credit card companies, AMEX, is offering money to current cardholders perceived as a credit risk to pay the balance on their cards and close their accounts. For its customers who carry large outstanding balances, Chase raised the required minimum payment from 2 to 5 percent. Citigroup says it is decreasing credit limits to due to the current state of the economy. Many cardholders have found that their credit scores have taken a hit, as their debt to credit ratio has increased due to those lower credit limits. Others are simply struggling to make payments or defaulting on them, as they prioritize which bills get paid in the current economic pinch. More consumers, consequently, have had to look for credit cards for bad credit. Credit cards help build credit scores and credit histories. If you do not have credit, you cannot obtain additional credit. Those who have to obtain credit cards for bad credit now are all too aware of the importance of credit accounts that are in good standing. They are often forced to obtain a card with higher rates and fees, due to their poor credit histories. These high rate cards allow the consumer an opportunity to improve their credit, assuming the bills are paid on time. Frequently, though, consumers are overwhelmed by the interest payments and fees and accumulate more debt and make their credit worse. A better option is a prepaid card, which offers all the convenience of a card. You put money on the card and can buy things with the card until the balance runs out. A prepaid card will not, however, help you build your credit. In lieu of opening new credit cards for bad credit, most financial advisors recommend that consumers pay off debts on their current cards and maintain the longest standing card. Credit scores are improved with the help of long standing credit accounts that are in good standing . Using a prepaid credit card for convenience and keeping your oldest account current will help you improve your credit. Eventually, you will no longer have to seek credit cards for bad credit and can, instead, qualify for traditional cards with low rates and fees.
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