This article outlines the best credit cards that are available in the market for those who have bad credit ratings and intend to improve their creditworthiness.
The market is inundated with options for credit cards depending on the kind of benefits that you are looking for. However, credit cards for bad credit assist people who have credit scores from 300 to 639 in rebuilding their credit.
The best credit cards for bad credit have low annual fees to the tune of $0. Some of these credit cards even offer rewards equal to 1% cash back or more on purchases.
All major credit cards meant for people with bad credit report the account related information to the credit bureaus every month. This is the reason why using the right kind of credit card in a responsible fashion is the best way to rebuild your damaged credit.
What Are Secured and Unsecured Credit Cards?
Most people with bad credit prefer to apply for a secured credit card. These cards require you to place a refundable security deposit and this amount becomes your credit limit.
This prevents you from spending more than you can repay. These cards charge the lowest fees and also provide the best approval odds. However, if you are in the requirement of an emergency loan at any time, you might want to look at unsecured credit cards.
Unsecured credit cards do not require a security deposit for approvals. This results in tougher requirements for approval, higher fees, and very little spending power beyond what you can afford in cash.
Unsecured cards tend to have low spending limits and you cannot increase your credit limit simply by paying more, which is the case when you add to the deposit of a secured card.
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How Do You Get a Credit Card With Bad Credit?
- Compare credit card offers: Shop around for the cards that you can get with the minimum fees, minimum deposit requirements, and the best approval odds.
- Fill out an application: Applying online is one of the best options considering that you can get the decision soonest.
- Place your security deposit: You will be required to submit your deposit either during the application process or after approval but before opening an account. This deposit can be funded with a transfer from the bank account or prepaid card. If you do not get approved or you are closing the account, these funds will be returned.
- Get approval: Although it is possible to get rejected for a secured credit card, it is not very likely.
We have identified and evaluated some of the best possible options for credit cards that you can consider if you have bad credit.
#1. Indigo Mastercard
The Indigo Mastercard is issued by Celtic Bank. This is an unsecured credit card and your account history is shared with all three major credit bureaus giving you an opportunity to establish a consistent payment record while benefiting from the convenience of a credit card.
Their website has a pre-qualification form that can give you the results within minutes. The process checks if you are eligible without an actual application submission which would trigger a hard credit inquiry that can reduce your credit score temporarily.
The card does not offer an apply by phone option at this time. You can open only one Indigo Mastercard account and cannot transfer a balance to your card. However, the online pre-qualification form is a good way to start. Once applied, your new card arrives within 14 business days.
The card does not require any one-time fees but incurs an annual fee in the range of $0 to $99. Depending on your creditworthiness, the card will charge you an annual fee of $0, $59, or $75 for the first year and $99 afterward.
It also carries with it a regular Annual Percentage Rate of 24.9%. The balances carried from month to month will accrue interest at an annual rate that can be above the market average for other credit cards, especially the secured ones. You should thus pay off the owed amounts as soon as possible.
The card limit is $300 which means that you can have as low as $201 to spend initially, depending on your annual fee. This can sometimes make the covering of your emergency expenses a little difficult.
- No upfront fee.
- Pre-qualification with a soft inquire avoids modification to your credit score.
- You can choose your favorite card design at no additional charge.
- No apply-by-phone or balance transfer option available.
- You may have only a single Indigo Mastercard account.
- The card lets you borrow very little amount making the covering of emergency expenses quite difficult.
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#2. Milestone Mastercard
The Milestone Mastercard is issued by The Bank of Missouri. It is an unsecured credit card that comes with an online pre-qualification process which takes just a soft inquiry. This way, you are saved from hard credit inquiries that lead to a temporary credit score damage.
There is currently no apply-over -phone option available. You can have only one Milestone Mastercard account and cannot transfer a balance to your card account. The card is generally delivered to you within 14 days of approval. Subject to credit approval, you can use this card for cash advances.
The card requires no one-time fees. However, an annual fee in the range of $35 to $75 will be incurred in the first year, the amount decided on the basis of your creditworthiness. Ideally, you should be able to move to a cheaper credit card in a year and an annual fee of up to $75 isn’t terrible.
The card comes with a regular Annual Percentage Rate (APR) of 24.9%. Although not terribly expensive, it is quite higher than the average APR of a regular secured card. You would not want to carry a balance for this card any longer than necessary.
The cardholders normally start with a spending limit of $300 which is effectively reduced to somewhere between $225 and $265 by the payment of your first annual fee, assessed when you are opening your account.
- No monthly or one-time fee.
- An online pre-qualification check with soft inquiry is convenient.
- No apply-by-phone or balance transfer option available.
- Limited spending limit of a maximum of $300 to satisfy your emergency needs.
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#3. Montgomery Ward Credit Account
The Montgomery Ward Credit Account is an unsecured credit card that works only for Montgomery Ward purchases online or through the catalog of the company. Although this makes its usage very limited, it is a great card to improve your credit score at little to no cost.
The card’s APR can be pretty high for some people ranging from 5.75% to 25.99% as per the creditworthiness of the applicant. Even when you are purchasing something with Montgomery Ward Credit, you may have to place a down payment depending on your creditworthiness and what you are trying to buy.
The card has no annual fees and there is no minimum credit score that is needed for this card’s approval. However, applicants can get rejected if a previous Montgomery Ward account has gone unpaid. The card does not offer rewards and the primary benefit is credit building and the opportunity to buy now and pay later.
- A good solution if you just want to improve your credit score and not looking for specific rewards and a lot of other purchases.
- No annual fee.
- no minimum credit score needed.
- Only usable for Montgomery Ward purchases.
- No rewards.
#4. Credit One Bank Visa Credit Card
The Credit One Bank Visa Credit Card is one of the best options available for someone who has bad credit but may need an emergency loan. The credit card has neither a one time fee for application processing nor a monthly fee.
The first annual fee would be a maximum of $95 (with up to $99 for every subsequent year) as per your creditworthiness. With a credit line of $300, this means that you would have $205 in immediate spending power with this card.
If you have damaged credit, you will probably be assigned an Annual Percentage Rate in the higher range. The average range of APR is between 17.99% and 23.99%. The card provides you with around 1% cashback that you can earn on the eligible purchases. This cashback is quite low if compared to the rate at which you will be paying interest.
- A good way to get an emergency loan with bad credit.
- Roughly 1% cashback in rewards.
- Expensive if you are not looking for emergency loans. In that case, you might want to look at secured cards as an option.
- Rewards are not very high and pale in comparison to the interest rate paid by you.
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#5. AARP Credit Card
The AARP Credit Card is a good option for those who have a lot of dining and gas expenditures. What makes this card impressive is that there is no annual fee. Most other dining or gas credit cards with similar reward rates cost their consumers somewhere between $50 and $100 annually.
This card comes with an average sign-up reward (10,000 bonus points redeemable for $100 in cashback) where you spend at least $500 on purchases in the first 3 months and you get to receive $100 in cashback. This card has a variable average interest rate of 16.49%.
It is marketed to AARP members but it does not provide any major benefits to the members of the organization. You do not even require to be a senior or a member of AARP to qualify for this card. With this card, you can redeem points to pay for your annual AARP membership. Also, by using this card at restaurants, you can support AARP Foundation.
So if you spend a lot at restaurants and gas stations, you can earn significant cash back for doing so without paying an annual fee.
- 3% cash back for every $1 spent on gas station and restaurant purchases.
- No annual fee.
- Low spending requirement for cash back sign-up bonus.
- Low reward rates in all other categories apart from restaurant and gas stations.
- No special benefits for AARP members.
#6. Open Sky Secured Visa Credit Card
The Open Sky Credit Card is an affordable secured card that does not require credit checks for new applicants. Thus there is no hard inquiry into your credit history when you apply for this card. This card becomes a great choice for those who have a damaged credit history and are looking for high approval odds.
The only requirements for this card are that you are 18+ years old, have enough income to afford a $200 security deposit, and a $35 annual fee along with monthly bill payments. At $200, Open Sky’s security deposit is quite lower than most other secured credit cards.
The card charges a 3% foreign transaction fee. If you are unable to make a bill payment during a given month, your balance will accrue a variable interest of 17.39%. This equivalent to what an average secured card charges.
- No credit check. Thus it serves as a good option for credit-rebuilders.
- Additional charges of 3% foreign transaction fee.
- $35 annual fee. If your credit score is not severely damaged, you can look at other options with no annual fee.
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#7. Capital One Secured Mastercard
The Capital One Secured Mastercard is a good choice for building credit at a minimal cost. It charges no annual fee or any foreign transaction fee. This card offers a starting credit limit of $200 in return for a security deposit that can be as low as $49 and is refundable.
The deposit requirement value depends on the overall creditworthiness. You will need to make a deposit of $49, $99, or $200 for a $200 spending limit. This means that there is a possibility that your assigned spending limit exceeds the amount of refundable security deposit you are required to place.
This credit card is useful if you have bad credit but with limited history. You would not be eligible for this card if you have a non-discharged bankruptcy, a past-due Capital One credit card, or an over-limit Capital One card.
Also, you cannot have a Capital One Credit card that has charged off in the past year, and your monthly income must exceed your monthly housing payments.
- $0 Annual Fee.
- No foreign transaction fee.
- The spending limit can be higher than the amount of your refundable security deposit on the basis of your creditworthiness.
- Not available to folks with a seriously damaged credit. Possible for those with bad credit but limited history.
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Getting a credit card with bad credit history can be quite tricky. However, it is crucial to open an account as soon as possible so that you can initiate repairing your bad credit reputation.
Irrespective of the credit card that you decide to use if you pay your monthly bill on time, it will definitely benefit your credit reports. Some people with bad credit need a card that has no security deposit to cover emergency expenses.
In such a situation, an unsecured credit card for bad credit is your only option. Shop around for the cards that suit your requirements in terms of annual fee, deposit requirements, and approval odds and start building your creditworthiness.
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