If you’ve ever wondered if there are credit cards available to those of us with less than stellar credit, the answer is yes. If you’ve ever been over 30 days late on a charge card, a mortgage payment, or a loan, or if you have unpaid medical expenses, you could suffer from bad credit. Believe it or not, millions of people are unable to keep up with their monthly bills and fall behind.
You might be under the impression that there aren’t any options or credit cards for those with poor credit. That’s simply not true. In this age of technology, having access to a credit card is almost required. With the growing need for consumers to make purchases on a credit card, it creates a demand for more credit cards for bad credit.
The Three Types of Credit Cards
There are three types of credit cards available for poor credit; the first is known as a prepaid credit card. With prepaid credit cards, your available credit would be exactly what you’ve deposited into it. Similar to a checking account, for example, if you deposited $300, that would be your card’s spending limit. Once the balance reaches $0, you must deposit more funds into your account. Prepaid cards are ideal for those on a budget, making online purchases, and for those who don’t have access to a traditional checking account. The approval rate for cards like these is normally guaranteed regardless of your credit score, avoiding the need to deal with credit bureaus.
The second type of card is a secured credit card. With a secured card, you’ll deposit a predetermined amount of money into an interest savings account; the money you deposit becomes collateral. After you have been approved, you are issued a card with a line of credit and your credit limit is the money you deposited. With each purchase, your credit limit decreases and your monthly payment is calculated and a bill is sent to you. A monthly payment is expected when you make purchases. Secured cards are beneficial because they are similar to regular credit cards, allowing you to pay for things that might not be accepted with regular debit or prepaid cards. Approval is almost always guaranteed but, unlike prepaid cards, secured credit card issuers do report payments to the three main credit bureaus. This is the perfect way to establish credit if you’re new to the credit card game, and equally great for those who are trying to re-establish their credit and boost their score for big purchases such as a car, home, etc. After making timely payments, card issuers will often increase your spending limit without requiring you to put down any additional deposits.
The third option is an unsecured credit card. This regular, traditional charge card does not require you to send in a deposit and your credit score is taken into account. If you have poor credit, your credit limit might be significantly lower than someone who has better credit, and you may be subjected to higher interest rates and fees. The advantage, of course, is that you don’t owe the card issuer a deposit. There are some unsecured credit cards for bad credit that come with credit limits ranging from $500-$1000. Making small purchases, keeping your utilization down, and sending payments in on-time can assist you in re-establishing credit, increasing your score over time.
7 Cards to Build Your Credit
While you may think the better option is a card you don’t have to make a deposit on, a secured credit cards best. There are plenty of them out there that charge the lowest fees and have high approval odds. If you’re unsure which card is right for you, we’ve compiled a list of seven of the best, with pros and cons, to get you started.
Capital One Secured MasterCard:
- You must make a deposit anywhere from $50 to $200 and it’s possible for your spending limit to exceed the refundable security deposit. However, don’t count on being approved for an increase in credit, which might be an important factor if you’re in need of an emergency loan. It’s a great option if building credit is your top priority.
- Like all major credit cards, Capital One reports your monthly payments to the three credit bureaus. So long as you make payments on-time and your credit score will increase.
- There is no monthly fee, a 25-day grace period on payments, and n APR rate of 26.99%.
- It’s not available to those who have significant credit problems. If you’ve filed for bankruptcy, have a past-due Capital One card or a card that charged-off within the last year, this might not be the right card for you.
- Enjoy peace of mind with $0 Fraud Liability
- Qualified applicants will receive a card with a competitive APR and no annual fee along with 1% cash back rewards on all purchases, terms apply
- View updates to your Experian credit score with free online access, terms apply
- Make paying your bill easier with the ability to choose your payment due date, terms apply
- Access your account on-the-go with the Credit One Bank mobile app
- Never miss an account update with customizable text and email alerts
- Show off your personality by selecting from a variety of card designs, a fee may apply
Discover it Secured:
- Since fees are one of the more important reasons people decide to apply for a credit card when they want to build their credit, it’s worth knowing that Discover it does not have any major fees.
- It’s one of ten secured credit cards that offer rewards whenever you make purchases. The 2% cash back you earn on your first $1,000 spent is double that of other cards on the market.
- The Discover it card is designed for those who are new to credit or wanting to rebuild, which is classified as anyone with a score lower than 670. You’re likely to be approved, even if you don’t have good credit.
- This card does require a $200 minimum deposit, and the APR is higher than other cards on the market, and it is not wise to carry a month to month balance.
- Most credit cards, including secured credit cards, require you to agree to a credit check along with approval criteria that must be met. All that’s needed with OpenSky is the verification of your identity. This helps you avoid a hard inquiry, which lowers your credit score.
- Being another secured credit card, you’ll be required to pay an up front security deposit of $200, but it is lower than most secured cards.
- The $35 annual fee is average for a secured card, but not necessarily the best option if you’re looking for one with no fee.
- If you are unable to pay you balance in full, you will accrue interest rates as high as 19%.
- Subject to credit, you’ll receive an initial credit limit of $400, and all credit types are encouraged to apply.
- FIT reports to the three major credit bureaus on a monthly basis, making it easy to improve your credit when you make regular payments.
- The application process is quick and easy, giving results in seconds.
- You are required to own a checking account, which might make this a difficult card to be approved for if you have any bankruptcy or payment discrepancies on your credit report.
- There is no annual fee, you can build your credit when you display responsible card use and keep the appropriate card utilization.
- There is no credit history or minimum credit score required to be approved.
- You’ll receive your card quickly with expedited processing.
- You must provide a refundable deposit of anywhere between $200-$2000 when submitting your application.
- You can pre-qualify with a soft inquiry. The pre-qualification process lets you know if you’re approved without submitting an application, therefore, avoiding a hard inquiry that will lower your score. Prequalifying, however, does not mean you are automatically approved.
- This card is made for people with less than ideal credit and reports to the three bureaus. Paying your bill and not maxing out your credit will help improve your score.
- Dependant on your score, the Indigo MasterCard charges an annual fee that ranged from $0 to as high as $99. If you’re looking for a more predictable cost, you might want to look elsewhere.
- With a 24.9% interest rate, it’s higher than the market average, so it’s important to pay off your charged as soon as possible.
All in all, there are plenty of options to build your credit. Whether you’re trying to do so to apply for a home loan, a car lease, or whatever else, it’s important not to feel discouraged just because you have a low credit score.