If you have poor or damaged credit and you're looking for the best credit card options (including secured or unsecured credit cards), you've come to the right place. MoneyRates.com has assembled credit credit cards for individuals with bad credit.
A lost job, a medical bill, an unmanageable mortgage payment -- these days, there are many reasons for a blemished credit history. Even if you have fair or bad credit, you have options for credit cards. By choosing a credit card for individuals with bad credit, with good credit management, you can take the first step in rebuilding your financial history.
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Choosing a good card when you have bad credit
If you have fallen on hard financial times, a credit card may seem out of your reach. Late payments, bankruptcy, and other financial troubles can create a serious dent in your credit score, and that can lead to credit card companies considering you too great a risk. That's where cards aimed at those with bad credit or poor credit might be able to help.
Credit cards can improve your credit score
The best way to overcome bad credit is to build good credit. The best cards for bad credit can allow you to do that by providing a small credit limit and allowing you to prove your creditworthiness by keeping your balance low, paying your bill on time and using the card wisely.
There are two types of credit cards for those with poor credit:
- Secured credit card. To obtain a secured credit card, you must first deposit a certain amount of money with the issuing bank. The most common amount is between $300 and $500. This becomes your line of credit. Over time and with an excellent record of payments, the bank might offer a higher line of credit without asking for an additional deposit.
- Unsecured credit card. With an unsecured credit card, banks are taking a chance on you, so your credit limit will usually be much smaller than those offered to borrowers with excellent credit. These low-limit cards offer you a chance to prove your creditworthiness. Banks review your payment history and use of the card on a regular basis and can offer higher credit limits as a reward for good credit behavior.
What you should know about cards for bad credit
If you have bad credit and want to rebuild it, you usually have to pay for the privilege in terms of fees and high interest rates. Keep these five points in mind when choosing a secured or unsecured credit card.
- Beware of fees. Even the some of the better credit cards for bad credit can charge eye-popping fees. Many of these charges come in the form of annual fees, processing fees, extra card fees (if you choose a card for someone else, such as your spouse), monthly maintenance fees and more. These fees can add up until much of your initial credit is eaten away.
- Watch out for interest rates. Some of the highest interest rates in the industry are levied by credit cards for those with bad credit. In addition, you might be charged interest on the entire balance, including annual fees, processing fees and more. Compare cards to find the best terms and avoid those with the worst rates.
- Learn about grace periods. Most credit cards offer a grace period, usually 30 days, before interest on purchases begins to accrue. Grace periods for bad credit credit cards might be much shorter or non-existent.
- Watch for "game changers." Some credit card companies will slam you with very high fees if you make one mistake. For instance, a payment that is a single day late can send your interest rate skyrocketing. Read the fine print to figure out what those "game changers" are and do everything you can to avoid them.
- Ensure they are reporting your credit. The best credit cards for bad credit will report to the three credit reporting agencies. This is essential to establish a more trustworthy credit history. Make sure the credit card you choose reports your good financial behavior; if it doesn't, there may be little point in having it.
Finally, be careful not to apply for too many credit cards at once. Though you might be eager to rebuild credit, applying for several cards can actually have an adverse effect on your credit score. Choose your card selectively and then use it wisely for the best long-term benefits.