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Despite some popular myths, simply having a credit card won’t turn your credit bad. But when your credit is bad, getting a credit card can be difficult.
Unsecured credit cards for bad credit are available, but when you find one, you’re likely to see high interest rates and fees in the terms. Card issuers, creditors and others in the lending industry want to know that you can reasonably be expected to repay borrowed money. A low credit score, for whatever reason, makes it harder for the credit card issuer to believe that you are this kind of person.
Not sure where your credit stands? You can get a free credit score, updated monthly, on Credit Sesame. You’ll also get access to your free credit report card and helpful guidance for improving your credit standing. Ultimately it is up to you to manage your credit accounts responsibly.
Even if you’re currently saddled with bad credit you may be able to qualify for a secured credit card. A secured credit card for bad credit can be a great first step toward healthy credit and finances. For a secured card, you make a cash deposit that the credit card issuer holds in case you default on your debt. You’ll still use and pay off the card just as you would a traditional credit card. Your credit limit is usually (but not always) determined by the amount of money you deposit with the card issuer. You’ll get your deposit back when you transition to a regular credit card and/or close your secured credit card account, providing you have met all your financial obligations with the issuer of your secured credit card. Some secured credit card issuers promote a quick application process and as well as a quick decision.
Start by taking a look at our top picks for the best credit cards for bad credit.
Best for Low Deposit: Capital One® Secured Mastercard®
The Capital One® Secured Mastercard® is an ideal, accessible choice for people who want to rebuild bad credit or establish a credit history because it has no annual fee and it comes with some of the lowest security deposit requirements we know of.
The required deposit on this card is $49, $99 or $200 refundable deposit based on your creditworthiness. No matter which minimum deposit Capital One® requires of you, the initial credit limit will be $200. You can deposit more money than your minimum required security deposit within 80 days of being approved and before you activate your card to get a higher credit limit (up to $1,000). Also, you can get access to a higher credit line with no additional deposit after you make your first five monthly payments on time.
Capital One® Secured Mastercard® features we like:
- Low deposit required: $49, $99 or $200 required initial security deposit
- $1,000 credit limit available for first-time card holders (on additional deposit within 80 days of being approved and before you activate your card)
- Reports to the 3 major credit bureaus
- $0 annual fee
- No foreign transaction fee
- CreditWise® from Capital One® credit score tracking app (availability will vary based on ability to obtain your credit history from TransUnion®)
- Features and benefits including Platinum MasterCard benefits such as extended warranty, 24/7 roadside assistance and price protection (see the Complete Guide to Platinum MasterCard Benefits on Capital One’s website for more information and terms, restrictions and exclusions that apply)
On the Wells Fargo Secured Credit Card, depositors can establish a credit line ranging from $300 up to $10,000, depending on the amount of the security deposit.
After you use the card responsibly for a period of time, you may become eligible to transition to an unsecured card from Wells Fargo or another issuer. Wells Fargo conducts periodic account reviews, but doesn’t say how often. Note that all of your credit activity will be reviewed, not just the history on this card. If you are approved for an unsecured card, your security deposit will be returned to you providing all your financial obligations on your secured card have been met.
If you think you might carry a balance, note that this card may have a lower annual percentage rate (APR) than the Capital One® Secured Mastercard®.
Wells Fargo Secured Credit Card features we like:
- Credit limits based on the security deposit you provide from $300 up to $10,000
- Reports to the major credit bureaus
- Features and Visa benefits including cellular telephone protection, auto rental collision damage waiver, roadside dispatch, travel and emergency assistance services (terms, restrictions and exclusions apply)
- Free online credit education courses and tips
Members of all branches of the U.S. Armed Forces – including the Navy – have a non-profit banking supporter in Navy Federal Credit Union. Its secured credit card, the nRewards® card, is a credit booster and a rewards earner in one.
The card is only available to NFCU® members. If you can say yes to one of these, you may qualify for membership to Navy Federal Credit Union:
- You are or were affiliated with the Armed Forces, DoD, Coast Guard or National Guard (including Active Duty, reservists and retired personnel)
- You have a grandparent, parent, spouse, sibling, grandchild, child or household member who is or was affiliated with the Armed Forces, DoD, Coast Guard or National Guard
- You have a family member who is a Navy Federal Credit Union member
It’s important to keep in mind that membership to the credit union does not guarantee approval for any of the credit cards they offer (or any other product they offer for that matter), you still need to submit an application for the credit card for review and consideration.
What we love about the card is its rewards program. Few secured cards offer rewards on your credit card purchases.
New card holders set their credit limit by making a minimum $500 deposit into a qualifying Navy Federal savings account before submitting your application; this deposit will be held for the duration of your nRewards Secured account. As far as earning rewards, when you use the card, you’ll receive 1 point per net $1 spent on eligible purchases, and you can start redeeming your points once you’ve earned 1,000 points. Rewards are unlimited, but do expire four years from the date earned.
Navy Federal Credit Union® nRewards® Secured Credit Card features we like:
- Credit limit/security deposit starting at $500
- Earns rewards (1 point per net dollar spent on eligible purchases)
- Reports to the major credit bureaus
- No annual fee
- No foreign transaction fee
- Features and benefits including collision damage waiver on auto rentals (certain terms, restrictions and exclusions apply)
One of the dogged myths in the credit card world is that opening a new account when you’ve got an existing account can harm your credit. While it’s true that a new credit inquiry can temporarily ding your credit score by a few points, it’s also true that selectively choosing a new account to open when you need it can potentially improve your credit standing with responsible management by you of your credit obligations.
That’s because a large part of your credit score is based on your debt utilization ratio – the amount of debt you carry in relation to the total amount of credit available to you. If you owe $180 on a card with a $200 limit, your utilization is at 90%. If you open a new card with a $500 limit but you don’t increase your debt, your utilization drops to 26%. The lower your utilization, the better for your credit score.
The U.S. Bank Secured Visa® Card is an option if you have bad credit but you want a first or second credit card.
One of the reasons we like this card is that the security deposit you make (minimum $300) is held in an interest-bearing U.S. Bank savings account, so it acts as your credit limit, and for collateral for your obligations, and also as an investment that bears dividends just for having money “in the bank.”
U.S. Bank Secured Visa® Card features we like:
- Security deposit/credit limit from $300 to $5,000
- Reports to the major credit bureaus
- Features and benefits including auto rental insurance and automatic bill pay (terms, restrictions and exclusions apply)
How to get a Credit Card with Bad Credit
Finding a credit card if you have what is considered bad credit isn’t impossible. Start with these tips:
- Sign up for a free account on Credit Sesame. Use Credit Sesame to check and monitor your credit. We provide your credit score for free every month, along with helpful tips and guidance for improvement.
- Be realistic. Don’t worry about new customer bonuses on other cards. Start with an attainable credit card, like a secured card or a credit card designed for people new to credit. You can work your way up to a traditional card designed for people with better credit, and you might be surprised at how quickly that can happen. You could see more credit doors open after just six to 12 months of consistent responsible use by you.
- Finances come first. Even if you’re not keen on the idea of having to save money first to get a secured credit card, the fact is that the more cash you have on hand, the better equipped you’ll be to handle financial crises that inevitably come along in life, including credit card debt that creeps up before you realize it. One benefit to secured cards is that they force you to save at least a little bit of money, and that’s always a good thing. If you do graduate from a secured card to a traditional card, think about keeping that security deposit in a savings account.
Editor’s Note: The information related to Wells Fargo Secured Credit Card has been collected by creditsesame.com and has not been reviewed or provided by the issuer of this card
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