People with bad credit have the fewest options for credit cards. That's because few credit card issuers want to take the risk of loaning a credit card they might not get paid for. Though it may be harder, you can get a credit card with bad credit.
Credit Cards for People With Bad Credit
There are some credit cards aimed specifically at people who have bad credit. For example, the Capital One Classic Platinum approves applicants with credit scores as low as 577 according to CreditKarma.com. The card has a 19.8% regular APR and $39 annual fee. You may be able to get the annual fee waived if you ask.
Orchard Bank also offers credit cards to borrowers with poor credit scores. When you apply, the bank checks your credit history to decide whether you give you a secured or unsecured credit card. This initial check is a soft pull and doesn't hurt your credit score. Reviewers with credit scores as low as 550 have been approved for the unsecured version of this credit card which has a regular APR between 14.9% and 28.9%. The Orchard Bank credit card does come with an annual fee and upfront processing fee that vary based on your credit history.
Retail stores have a reputation for approving applicants who have bad credit. You have a better chance getting approved for a limited purpose credit card that can only be used at that store rather than a credit card backed by Visa or MasterCard.
Secured Credit Cards
Too many borrowers dismiss secured credit cards because the cards require a security deposit to be made against the credit limit. A secured credit card that reports to the major bureaus is better than having no credit card at all. Many secured credit cards can be converted to unsecured credit cards after a year of on-time payments.
If it's the security deposit that's keeping you from getting a secured credit card, start putting $50 in a savings account each month. In six months, you'll have $300 to put toward a credit secured credit card. Some of the money can be used to take care of the application fee and the rest can be put toward your credit card balance. Yes, you'll have a low credit limit starting out, but that's true of unsecured credit cards for bad credit, too.
The Capital One Secured MasterCard accepts a security deposit as low as $49 or $99 for a $200 credit limit depending on your credit limit. If you have extremely bad credit, you'll have to pay the entire minimum $200 security deposit, but you can come up with that in four months by saving $50 a month.
What to Watch Out For
Beware of fee harvester, or subprime credit cards, that charge high upfront fees which take up up most of your credit limit. Though Federal law limits the amount of fees to 25% of the credit limit, at least one subprime credit card issuer has gotten around the law by assessing a $90 fee before the credit card is ever issued. The First Premier Bank Gold MasterCard is an example of a credit card to stay away from.
Prepaid cards are often advertised as an option for people with bad credit, but these aren't really credit cards. Prepaid cards require you to make a deposit before you can use it to make purchases. But unlike secured credit cards, your prepaid card purchases are deducted from your balance. Prepaid cards don't improve your credit either, because they don't report to the major credit bureaus. (They can't since they're not a credit product.)