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 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 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 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 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.
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 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 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.
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