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Best Credit Cards for Bad Credit

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Find the credit cards for bad credit in 2020

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Only about 21% of Americans have “good” credit. However, a good chunk of Americans have no credit at all. As such, it is extremely difficult for them to obtain a credit card or any type of loan.

It’s the old Catch-22 of low credit: Once your credit score falls below a certain level, it becomes much harder to qualify for a line of credit. The only way to build that score back up is to responsibly use some form of credit. See the contradiction?

Thankfully, most credit card issuers have products aimed at people in this exact situation. Secured cards have lower qualifying standards – and lower credit limits – and require a deposit to open, usually equal to the credit limit. Once you’ve used the card long enough to build your score up, most issuers will upgrade you to a traditional card.

So, can you get a credit card if you have poor credit? Thankfully, yes you can, though there are a few steps you’ll need to take to open a credit line. Some credit building benefits include being able to purchase a home and applying for further loans.

Read on to learn more about some of the best credit cards for bad credit, as well as how to improve on your credit score.  Like with most types of credit cards, the quality of these products varies. Here are some of the best options for consumers with bad credit in 2020.

 

Credit One

Credit One is a card worth considering if you are looking to rebuild your credit. It’s regarded as a great options for people with poor credit as it doesn’t require a deposit.

The annual fee is between 0 and $99, based on the applicant’s credit history and reliability. The card offers a $300 credit limit, which is decent for an unsecured card. Offsetting the potential annual fee is the 1% cashback reward that usually only comes with a premier card for those with high credit.

The interest rate for this card is significant at 17.99% to 23.99% Variable. If you get this card, you want to pay off the balance each month to avoid high-interest costs.

Discover it® Secured

Another top choice card is the Discover It card. It is a valid credit card and reports to the three credit bureaus, which can be a plus for repairing poor credit.

This card is popular because it’s one of the only secured cards offering cash-back rewards. Consumers earn 2% cash-back on gas stations and restaurants, up to $1,000 in purchases per quarter, and 1% cash-back on all other purchases. Discover will also match any cash-back earned after the first year.

Cash-back rewards can be redeemed at Amazon.com or on your statement. There’s no minimum redemption amount and rewards never expire.

Discover requires a security deposit equal to the credit limit, up to $2,500. If you put down $600, for instance, you’ll get a $600 credit limit. After eight months, Discover will review your account to see if you qualify for a regular credit card.

Your account activity is reported to all three credit bureaus. Discover also shows the cardholder’s FICO credit score, helpful for those looking to track their credit progress. Cardholders will also be notified if their Social Security number is found on any suspicious websites or the dark web.

There’s no annual fee, Discover waives the fee on your first late payment and doesn’t charge a penalty APR on late payments.

Discover It is also a secured card, meaning, you as the account holder, must provide funds upfront that Discover will hold to guarantee your line of credit. The minimum deposit is $200, which can come from your bank account and is withdrawn by Discover.

In return, you get a credit card with some perks too. There is no annual fee for the card. After just 8 months, Discover reviews the account to consider switching you to an unsecured card if you’ve handled the card responsibly.

Another perk is the 2% cashback offered on purchases at gas stations and restaurants up to $1,000 per quarter. For additional spending, Discover offers a 1% cashback reward.

Secured Mastercard® from Capital One®

The Secured Mastercard® from Capital One is the only secured card that allows customers to put down less than the credit line. Eligible users can put down $49 or $99 to receive a $200 credit limit. They may also put down more to receive a higher credit limit, up to $1,000.

Capital One may also increase the credit limit with no extra security deposit if you make the first five payments on time. It’s not clear whether or not Capital One eventually promotes responsible customers to a traditional credit card.

Cardholders can get free access to their credit score with CreditWise, which also notifies users if their information may be compromised. Cardholders may add authorized users to this card.

Other card perks include travel accident insurance, no foreign transaction fees, extended warranties on certain items and 24-hour travel assistance services. There is no annual fee.

First Access

First Access is an unsecured Visa credit card. They say they accept applicants with credit scores from 300 to 639.

The annual fee of $75 is steep; however, it is $48 after the first year. One way First Access makes up for the first year annual fee is no monthly fees. Those go up to $6.25 per month after the first year.

You can apply online and know the results of your application in less than 60 seconds. If approved, you start with a credit limit of $300.

Worth noting, there is a one-time fee of $95, which will use up a third of your available credit right away. The interest rates are higher than some at a regular APR of 34.99%.

BankAmericard® Secured Credit Card

Deposit limits for the BankAmericard® Secured Credit Card start at $300, slightly higher than other cards on this list. The maximum credit limit is one of the largest at $4,900.

Bank of America provides free access to your FICO credit score, perfect for customers who want to monitor their credit. The score is updated once a month.

The bank reviews accounts regularly to decide if customers are ready to have their security deposit refunded. It’s not clear how often Bank of America updates these accounts, however.

There is a 3% foreign transaction fee and no annual fee.

U.S. Bank Secured Visa® Card

The U.S. Bank Secured Visa® Card has a security deposit range between $300 and $5,000. U.S. Bank is one of the only credit card companies to put the security deposit in an interest-bearing account. When it’s time to close an account, cardholders will receive the original deposit plus any interest.

Customers receive updates to their VantageScore from TransUnion credit score, and are notified of any major changes to that score.

There is a $29 annual fee and a 3% foreign transaction fee. Users can also choose their own due date, making on-time payments a little easier.

Wells Fargo Secured Card

The Wells Fargo Secured Card has a minimum security deposit of $300. The card reports activity to all three credit bureaus, allowing users to build and improve their credit history over time.

Wells Fargo eventually assesses customers to determine if they’re eligible for the Platinum Visa Credit Card, an unsecured card. There is no set time frame on when accounts are reviewed.
Cardholders get access to basic financial tools, allowing them to create a budget and categorize their expenses. Other benefits include roadside dispatch service, emergency card replacement, travel and emergency assistance, and cell phone protection if your phone is stolen or damaged.

There is a $25 annual fee.

First Progress

First Progress offers a fleet of cards all for customers with poor credit, including the First Progress Platinum Select, First Progress Platinum Prestige, and First Progress Platinum Elite.

All three cards are secured cards and collect between $200 and $2,000 at issuing of the card. When the balance of the card is paid off, the deposit is refundable. The annual fee ranges between $29 and $49, depending on which version of the card you get.

Interest rates vary as well:

  • Platinum Select, 13.99% variable
  • Platinum Prestige, 9.99% variable
  • Platinum Elite, 19.99% variable

While the elite card carries the highest interest rate, it also has the lowest annual fee.

All three First Progress cards promote that no credit history or minimum credit score is required to get approved.

Green Dot

Green Dot is a secured card meaning it does require a minimum deposit to get and use the card. It’s unique, though, because it doesn’t need a bank account to open the card. Applicants can mail a check or money order to Green Dot to secure their card. Participating retailers will also accept cash to be applied to the card.

This card also requires a $39 annual fee.

Worth noting about Green Dot is that your credit limit will be equal to your security deposit. In essence, you are loaning yourself money to build or repair credit.

The interest rate is 19.99% which means you would be paying interest on your own money if you don’t pay the card off each month.

Indigo

The Indigo Mastercard is an unsecured card worthy of noting if perhaps you have poor credit. The annual fee varies between 0 and $99, depending on your credit history and risk.

While it’s nice, this is not a secured card, meaning you have to provide a deposit, and generally speaking, unsecured cards are a bit more challenging to get. Indigo will provide pre-approval with no impact on your credit.

Indigo does report to all three major credit bureaus each month, so the opportunity to improve credit with smart spending is possible.

Indigo starts borrowers with a $300 credit limit, and interest rates are based on the market but tend to be higher than some other available cards.

Merrick

Merrick is another secured card. You set your credit limit based on the amount of the secured deposit you provide. It can be from $200 up to $3,000. If you’re looking to increase your credit limit from the initial threshold, you only need to add to your deposit.

Merrick will evaluate your account after nine months. If you had used the card wisely and made payments on time, then you can be considered for a rate increase without an additional deposit.

While this seems like a prepaid debit card because of the matching deposit and credit limit, there is one advantage. Merrick does report monthly to all three major credit bureaus. It allows you to show a responsible spending pattern to establish or improve your credit.

In the first year, Merrick will charge a $36 annual fee. After the first year, the cost is billed monthly at $3 per month.

This card also offers free access to your FICO credit score updated each month, along with fraud protection on the card.

Open Sky

Open Sky is one of the best choices for those looking to repair their credit for several reasons. When an applicant applies to Open Sky, there is no credit check, so there is not a hard inquiry. Applicants must meet these criteria for approval:

  • 18+ years old
  • Income for $200 deposit
  • Income to afford monthly payments

While this is a secured card requiring the $200 deposit, there is an excellent opportunity to grow credit. You can get approved for a credit line up to $3,000, depending on the deposit amount.

Open Sky does offer increases in available credit over time without additional payment. However, you must make payments on time.

There is a $35 annual fee for this card with a variable APR rate of 17.39%.


Obtaining a Credit Card With Bad Credit

Obtaining a credit card with poor credit is simple, though one should proceed with caution. You should make sure you do not let your payment due date slip by you, and that on each due date, you pay in full. This way, you’ll not only avoid late fees but also keep your credit score growing and ensure you’re eligible for a line of credit with regular APR.

This will help you build credit, so that the next time you log on to check your FICO score, you’ll be surprised to see how much it has grown. Most credit scores allow you to use a mobile app to help keep track of your finances as well.

When you’re out and about, make sure that you use your debit card before your credit card, and don’t make any purchases you cannot afford.

Want to learn more about personal finances and other credit card options?  Click here to learn more.

Frequently Asked Questions

Learn the basics of credit cards for rebuilding credit

How do you apply for credit cards with bad credit?

If you have poor credit or have no credit at all, it can make it more difficult to apply for a credit card. But, it is by no means impossible, and doing so can help you build your credit.

You can apply to these cards the same way you’d apply to any credit card at most major credit bureaus. Most major credit bureaus allow online applications and will let you know your approval decision in a matter of hours. Sometimes, you’ll be approved fast, often within minutes. This is due to their algorithm in place to process a faster credit check. Sometimes, however, the credit check is more complicated and may take a bit longer.

In most instances, your credit report is the most important tool for deciding if you are eligible for a line of credit.

How do you get approved for credit cards with bad credit?

A secured credit card is the best way to go for someone with poor credit, as they have higher approval ratings and offer lower interest.

However, if you absolutely cannot get approved for a lower interest card, you can apply for an unsecured credit card. Cards with guaranteed approval will mean that the majority of applicants will be able to take on an unsecured credit card or with an unsecured line of credit.

Due to the higher interest of guaranteed approval cards, or cards that you pre-qualify for, you’ll need to be careful how you spend and be disciplined when paying your credit card off each month. Some guaranteed approval cards will offer no credit check as well, making them easier to obtain.

Unsecured cards mean that your interest is not fixed, and as such, you can end up paying more with an unsecured card. Thus, applying for a secured card, such as a Visa card or a Mastercard is likely your best option.

Some credit cards will ask that you use a security deposit to gain access to the card. This security deposit can be anywhere from a few dollars to a few hundred. Your security deposit minimum will be taken when you take out the card.

Keep an eye on card offers to see which are the best for you. You should also look for cards with both cashback rewards and online access to ensure your responsible use of your card.

What are top credit cards for bad credit?

The best credit cards for poor credit depends on how bad your credit it, or if you have any credit at all. Those with no credit history can also utilize these cards.

Some credit cards for those with poor credit, or a limited credit history, include:

  • The First Access Visa Card
  • A Secured Visa CardDiscover It
  • Secured Card Fit Mastercard
  • Secured Mastercard

These cards all have extremely high ratings among their users and offer credit cards to those with bad credit or no credit. However, be aware that all of these cards offer extremely high-interest rates, most of which are above 20% Intro APR. This means you’ll need to pay off your card as quickly as possible to avoid paying excessive interest.

You also should be aware that an intro APR means that it can, and likely will, get higher over time. Thus, you should always look for a card with the lowest intro APR.

You should always go for the credit card issuer with no annual fee. However, if your credit history is extremely poor, you may have to give in and pay for the annual fee.

Try not to be blinded by glittery credit card offers, and look underneath those for the card that is best for you.

You can also get a prepaid card to help keep your spending limit in check. With a prepaid card, you’ll simply load an amount onto the card and then spend with that amount, rather than by using a credit line.

Once you’ve had some credit education and have built credit for a while, you’ll be eligible for regular APR. A regular APR is a lower interest rate offered to people with better lines of credit, and a regular APR is often the best available.

Is consolidating credit bad for your credit?

In theory, debt consolidation is a great way to get your bad credit under control. It allows you to pay one monthly payment toward your debt by doing a balance transfer, rather than paying off several credit cards each month. However, it can be bad for your credit if you continue to spend as you did previously after the balance transfer.

If you’re interested in credit repair, it is a great option. But, you must be careful not to succumb to the temptation of taking out more credit after you’ve completed your balance transfer. Remember, the balance transfer is there to help you, not to put you further into debt.

Often, debt consolidation means your card will be interest-free for the first year. As such, you should use this first year with the card to focus on paying off your balance.

Is closing credit cards bad for your credit?

In short, yes. While many people want to cancel their credit cards to ensure they don’t spend on them anymore, it can hurt your credit score to do so. Having a line of credit with a lot of available credit on it is good for your credit score in the long run. This alone can help your credit score and can help you get to your coveted good credit.

It is also good to have in case of an emergency. So, you may consider keeping this card somewhere where you don’t have direct access to it so that you won’t be tempted to spend on it. With responsible card use, this should not be an issue.

Are store credit cards bad for your credit?

Store credit cards can be bad or good for your credit score. It’s all in how you use them. Most store credit cards have a smaller credit limit than traditional credit cards that have a higher credit line, which means those with limited credit history can use them to build credit.

If you use them responsibly, they can be a great way to build on your credit. If you spend on them without thinking, this can lead to trouble down the road. Though these lines of credit are only for eligible purchases, if you’re responsible, you can ensure that you use them to improve your credit score. With responsible card use, you can see your credit report improve rather quickly.

Is having too many credit cards bad for your credit?

Many people fall into the trap of having too many credit cards. This is especially the case if they fall into the trap of using a balance transfer to consolidate their loans, especially where there is no fee for the first year. As we stated above, the balance transfer is to help you, not hurt you, but too many people fall into this trap.

Opening too many credit cards in quick succession, and not paying them can also create issues. In general, you’ll want to ensure that you don’t owe more than 30% of your total credit limit.

As long as you ensure you do not make a late payment and that your credit use is in line with your credit limit, you should be fine. You can also link your credit card to your checking account and set up automatic payments to ensure you don’t make a late payment.

What are the costs of poor credit?

Your credit score is set up to tell creditors information about you as a borrower. If your score is low, it means you are a higher risk for lenders. It also means you are likely to pay more in fees and interest rates every time you need to use credit.

While these cards may have higher costs, fees, and interest, the goal should be to use them to improve your overall credit score.

What are the differences between secured and unsecured credit cards?

Credit cards for those with poor credit come in two forms, secured and unsecured.

A secured card means the cardholder has provided a financial payment to the credit card company as security. In many cases, the holder pays a deposit which is then equal to the credit limit on the card. As the cardholder’s credit improves, the credit limit can increase without an additional deposit.

An unsecured card means the card is issued without a deposit. While in theory, this might sound like a better option, often it isn’t because the fees and interest rate are much higher on an unsecured card.

Consider these options when looking for good credit cards for poor credit.

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