If you have bad credit, you may have experienced a lot of difficulty in trying to get a new credit card. Because banks consider people with bad credit to be high risk customers, credit cards for bad credit tend to have higher APRs (annual percentages rates) and annual fees. But you shouldn’t necessarily sign for first credit credit card that approves your application. There are lots of bad credit credit cards available, so before you choose a card that may end up hurting you even more, compare credit cards for bad credit below. Chances are we can help you find a bad credit credit card that won’t lead you into more debt in the future, and can actually help improve your credit score.
What is a bad credit credit card?
Credit cards for bad credit are designed to give you some credit, while holding you to some very tight limitations and restrictions. Regardless of why you have bad credit, a bank is going to be disinclined to lend you money or credit if you have a bad credit score. They’re afraid you may not pay them back on time - or at all.
However, if you have bad credit, the best way to improve it is responsible borrowing (which a bad credit credit card help you do). An improved credit score will allow you to take out loans and get a better credit card in the future.
You have a few choices for a bad credit credit card:
A secured credit card
A bad credit unsecured credit card
A prepaid card
Secured Credit Cards
Lots of people with bad credit end up getting secured credit cards. However, a secured credit card may not be the best deal.
Secured credit cards were designed specifically for people with bad credit, so you shouldn’t have as much trouble getting approved. After you get approved, you have to pay a deposit on the card. The amount of credit you get depends on the size of the deposit. So if you deposit $1000, you may be able to borrow up to $1000. However, some secured credit cards will only allow you to use a certain percent of your deposit amount, so you may only be able to use 75% or $750 in a month, for example.
Consider the First Progress Platinum Prestige MasterCard Secured Credit Card. This card approves no credit or bad credit, and as you improve your credit score, they report monthly to the three major credit bureaus. The annual fee on the card is $44 and the APR starts at 11.99%. You can deposit between $300 and $2000 on the card.
APRs and annual fees can be very high on secured credit cards. You may see APRs as high as 22%, or higher.
Because of high APR and annual fees, you should be careful that you don’t sign up for a secured bad credit credit card that hurts you more than it helps you. Many people have opened a secured credit card account only to discover that they spend so much money on fees that they can’t afford to borrow anything.
So why would someone choose a secured bad credit credit card? Secured credit cards can be very good credit building credit cards. Generally, if you can keep up with your payments for a whole year, you will then qualify for an unsecured credit card. Even if you can’t get an unsecured credit card yet, you will probably be able to drop the annual fee and some of the restrictions. As a result, some people will stick out a year with a highly restrictive secured credit card so that their credit scores will quickly improve.
However, many people are starting to turn instead to bad credit unsecured credit cards.
Unsecured Bad Credit Credit Cards
A bad credit unsecured credit card is more like a standard credit card. As a result, lots of people with bad credit are turning to unsecured credit cards instead of secured credit cards when they can get approval.
Unsecured credit cards for bad credit can be very expensive, even more expensive than secured credit cards.
As you keep up with your payments, your credit score will improve. And many people like the fact that an unsecured bad credit credit card is an actual credit cards and doesn’t require a deposit. However, they can be extremely expensive initially.
A prepaid card is actually a debit card, not a credit card. However, you may come across some prepaid cards while looking for a bad credit credit card. With a debit card, you keep money in your account and you can spend as much money as you have. If you do overdraw (spend more than you have on account) your account, you will start to see large fees accumulating very, very quickly. Keep track of your balance and do not spend over it!
You can get a debit card with bad credit because a debit card doesn’t actually involve a line of credit. You are only spending the money that you have. However, this means that debit cards don’t help you improve your credit score.