Do unsecured credit cards for bad credit exist?
Offering unsecured credit cards for people with bad credit is fraught with difficulties due to the following reasons: Unsecured credit cards are not secured with any underlying asset since credit is extended purely on the basis of the customer’s creditworthiness. Hence, in the event of the consumer defaulting on credit card payments, the credit card company (card issuer) has no option but to contact the consumer and force the latter to make good the obligation to pay the borrowed sum. The card issuer reports the default to the credit bureaus and this results in the consumer’s credit score declining significantly. If the user defaults repeatedly, the following situations may arise: • The issuer may try and collect payments using an inhouse collection agency or an external debt collection agency. • The credit card company may file a lawsuit to recover bad debts, win the case and get a writ of garnishment that will allow the credit card issuer to withhold 25% of the debtor’s salary in lie
