If you’re in search of credit cards for bad credit, we have good news for you. There are plenty of options available that can help you rebuild your credit score and improve your financial history.
In this article, we’ve compiled a list of the best credit cards along with all the information you need to build a better financial future for your business.
Best Credit Cards for People with Bad Credit
Credit One Bank Visa
Ideal for: Building Credit
- Minimum Credit Score: 300
- Regular Annual Interest Rate: 24-26.24% (variable)
- Annual Fee: $0-$75 for the first year, $0-$99 annually thereafter.
The Credit One Bank Visa offers a rewards program that allows you to earn 1% cashback on all purchases such as groceries, gasoline, and services like internet, mobile phones, and cable TV. One of its greatest advantages is that you can choose your own payment due date.
Discover it Secured
Ideal for: Cash Back
- Minimum Credit Score: 350
- Regular Annual Interest Rate: 22.99%
- Annual Fee: $0
With the Discover it Secured card, you can earn 2% cashback on purchases at restaurants and gas stations, up to $1,000 per quarter, and 1% on all other purchases. Just keep in mind that you’ll need to leave a refundable deposit of $200.
Capital One Secured Mastercard
Ideal for: Rebuilding Credit with Minimal Costs
- Minimum Credit Score: 350
- Regular Annual Interest Rate: 26.99%
- Annual Fee: $0
The Capital One Secured Mastercard has no annual fees or hidden costs. Additionally, you can access a higher credit line if you make your payments on time for five months. However, you’ll need to leave a refundable deposit of $49, $99, or $200 to get a credit limit of $200.
Indigo Platinum Mastercard
Ideal for: Anyone who Declared Bankruptcy
- Minimum Credit Score: 350
- Regular Annual Interest Rate: 24.99%
- Annual Fee: $75 for the first year, $99 thereafter
The Indigo Platinum Mastercard is a great option for people with bad credit or who have declared bankruptcy. It offers a simple prequalification process that won’t affect your credit score. The benefits include a foreign transaction fee of only 1% per purchase and additional travel perks, such as coverage against theft and physical damage when renting a vehicle.
DCU Visa Platinum Secured
Ideal for: Low Interests and No Fees
- Minimum Credit Score: 300
- Regular Annual Interest Rate: 11.50%
- Annual Fee: $0
The DCU Visa Platinum Secured credit card has no annual fees, low-interest rates, and offers flexible credit limits, allowing you to use as much credit as you need. It also comes with benefits for renting vehicles, traveling, and when used to pay for insurance. However, it doesn’t offer rewards.
Total Visa Credit Card
Ideal for: Building Credit Discipline
- Minimum Credit Score: 300
- Regular Annual Interest Rate: 34.99%
- Annual Fee: $75 for the first year, $48 thereafter
The Total Visa Credit Card is one of the best cards for rebuilding bad credit. The bank reports your payments to the three major credit bureaus. However, the Total Visa Credit Card requires a program fee, an annual fee, a monthly servicing fee, and has an initial credit limit of only $300.
OpenSky Secured Visa
Ideal for: No Credit Check
- Minimum Credit Score: 300
- Regular Annual Interest Rate: 17.39%
- Annual Fee: $35
The OpenSky Secured Visa is an option that doesn’t require a credit check when applying. You don’t even need to have a bank account to qualify, and your credit-building progress will be reported to the three major credit bureaus. However, the OpenSky Secured Visa has an annual fee and requires a minimum deposit of $200.
Green Dot Platinum Card
Ideal for: Credit Discipline
- No Minimum Credit Score Required
- Regular Annual Interest Rate: 19.99%
- Annual Fee: $39
If you’ve had trouble getting approved for other cards, the Green Dot Platinum Card is a great option. It requires an initial deposit, which becomes your credit limit. By paying on time and using it responsibly, you can see your credit score increase. It also doesn’t affect your credit when you apply because it doesn’t check your credit status.
Credit Builder Secured Visa
Ideal for: Flexible Credit Limit
- Minimum Credit Score: 300
- Regular Annual Interest Rate: 25.99%
- Annual Fee: $0
While the Credit Builder Secured Visa doesn’t offer rewards and has a high annual interest rate, it has the advantage of no annual fee. It allows you to establish your own credit limit, ranging from $300 to $3,000 based on the amount you deposit into your Credit Builder savings account. Additionally, Armed Forces Bank will help you build your credit history by reporting your financial performance to the three major credit agencies.
First Progress Secured Mastercard
Ideal for: Building or Rebuilding Credit History
- No Minimum Credit Score Required
- Regular Annual Interest Rate: 5.24% for Platinum Prestige, 9.24% for Platinum Select, and 15.24% for Platinum Elite
- Annual Fee: $29, $39, and $49, respectively
This card doesn’t require a minimum credit score or credit history for approval. When you use it, your activity will be reported to the three major credit bureaus. The minimum deposit required is $200.
How to Choose the Best Credit Card for Bad Credit
When selecting a credit card, it’s crucial to consider your needs and financial goals. Here are some tips to help you make an informed decision:
- Analyzing Fees and Charges: Compare cards in terms of interest rates, annual fees, and other associated charges. Look for a card with reasonable and transparent fees that fit your budget.
- Rewards and Benefits: Although credit cards for bad credit may have limitations in terms of benefits, some might offer rewards programs, such as discounts on car rentals or rental insurance.
- Credit Limit and Security Deposit: Understand what your initial credit limit will be and whether a security deposit is required. A higher credit limit and the possibility of getting your security deposit back over time are important factors to consider.
- Reporting to Credit Agencies: Make sure the card you choose reports your payment history to credit agencies. This is crucial for improving your credit score over time.
- Customer Service and Educational Tools: Opt for a financial institution that provides excellent customer service and educational resources to help you better manage your credit and finances.
Remember, although you’re looking for a credit card for bad credit, your ultimate goal is to rebuild your credit history. Use the card responsibly, make timely payments, and keep your balance low to make the most of this opportunity to improve your financial situation.
How to Get a Credit Card with Bad Credit
To obtain a credit card if you have a poor credit history, follow these steps:
- Gather your personal information, including your Social Security number, date of birth, and residential address.
- Review the card’s conditions to ensure you understand the fees and interest rates associated with the card.
- Fill out the application online or submit a paper application to the company or institution where you applied for credit.
- Wait for the response from the institution. If approved, you’ll receive the card by mail within a few weeks. If denied, you can request a letter explaining why the card was not approved.
Other Alternatives to Get a Credit Card
- Apply for a Secured Credit Card: Secured credit cards require a cash deposit, usually equal to the card’s credit limit, as collateral. The limit is typically equal to the deposit amount.
- Become an Authorized User: Being an authorized user on someone else’s credit card account can be a good way to establish or build your credit history, especially if the primary account holder has a good credit score.
- Get a Co-Signer: A co-signer involves having another person vouch for your creditworthiness and agree to assume responsibility for your credit card payments if you’re unable to make them.
- Apply for a Store Credit Card: Store credit cards usually have less strict credit criteria than major bank cards. However, they often have higher interest rates and limited reward programs, so it’s important to weigh the pros and cons before applying.
How Credit Cards for Bad Credit Work
These credit products work like any other credit card. However, unlike cards for good credit scores, these cards typically have smaller credit limits and higher interest rates.
The advantage is that most of them can help you build your credit if you demonstrate financial responsibility. This will allow you to access other types of capital in the future.
It’s important to note that there are both secured and unsecured credit cards for bad credit.
Secured credit cards require a security deposit that protects the card issuer in case you don’t pay your debts. Generally, this deposit acts as your credit limit, making it easier to obtain a secured card.
On the other hand, unsecured credit cards for bad credit don’t require a deposit but usually have higher interest rates and lower credit limits. The credit limit will depend on the financial institution or bank.
Pros and Cons of Credit Cards for Bad Credit
Credit cards for bad credit can be a stepping stone to recovering your financial stability, but it’s important to understand both the positives and potential challenges before applying for one.
Pros:
- These cards give you an opportunity to demonstrate your financial responsibility and improve your credit score over time.
- They are generally easier to qualify for than conventional credit cards, giving you a second chance.
Cons:
- Some credit cards for bad credit may have higher interest rates and annual fees, which could increase costs if not managed properly.
- The initial credit limit may be low, and you may be asked for a security deposit (which may or may not be refundable).
Tips for Using a Credit Card with Bad Credit
To make the most of this opportunity, it is crucial to use your credit card responsibly and strategically. Here are some tips to maximize your card’s benefits, even if you have a challenging credit history.
How to Use a Credit Card Responsibly
Responsible use is key to avoiding unnecessary debt and maintaining a healthy relationship with your finances. Here are some tips to achieve that:
- Set a Budget: Before making any purchases, create a realistic budget that indicates how much you can spend. Keep track of your expenses and make sure not to exceed your limits.
- Pay on Time: Timely payments are essential for building a positive credit history. Set reminders or automatic payments to ensure you pay at least the minimum amount or more each month.
- Avoid Full Balance: While it’s important to pay on time, it’s also advisable to avoid carrying a full balance. Strike a balance between paying off your debts and not accumulating too much on your card.
How to Avoid High Interest Rates and Fees
High interest rates and fees can significantly impact your ability to improve your credit. Here are some strategies to avoid these unnecessary costs:
- Understand the Terms: Carefully read the terms and conditions of your card. Pay attention to interest rates, annual fees, and other associated costs.
- Look for Lower Interest Rate Cards: Research different options and compare interest rates. Look for cards with lower rates to minimize accumulated interest.
- Avoid Unnecessary Fees: Keep track of the fees associated with your card and avoid actions that may incur additional charges, such as cash withdrawals.
Alternatives to a Credit Card for Bad Credit
Debit Cards
A debit card is directly linked to your bank account, so once you spend the money in your account, it’s gone.
This can be useful for controlling your spending as you can see exactly what you’re spending and when.
Prepaid Credit Cards
A prepaid credit card allows you to load it with a specific amount of money and then use it like a regular card.
Business or Personal Loan
A business loan is designed to help businesses finance short or long-term projects, such as purchasing new equipment or expanding operations.
Similarly, you can apply for personal loans by requesting a fixed sum of money and making monthly payments until you repay the loan in full.
This option can be attractive if you’re looking for a lower interest rate than what you would get with a credit card.
What Is Bad Credit?
The term “bad credit” is typically used to describe a credit score below 650.
Did you know? Currently, 20% of Americans have bad credit.
A low credit score may indicate to lenders that you’re a high-risk borrower, which could result in higher interest rates or denial of credit.
Credit bureaus calculate this number using various factors, such as payment history, outstanding debt, account age, and other data.
A low credit score can be the result of missed or late payments, high levels of debt, and/or a short credit history.
Tips for Repairing Your Damaged Credit
- Always Pay All Your Bills on Time
- Ensure your rent payments are reported to credit bureaus.
- Stay Below 30% of Your Credit Line
- Avoid making too many credit inquiries; research thoroughly before applying for credit products.
- If you’ve paid off your credit line, don’t close it. Keep it open and unused.
- Regularly Review Your Credit Report, and make sure it’s error-free.
The Consumer Financial Protection Bureau (CFPB) has a website with information on how to improve your credit score.
How to Build a Positive Credit History
Here are some steps you can follow:
- Use Your Card Regularly: Make small and regular purchases with your credit card and make sure to pay them off on time.
- Maintain a Low Balance: Avoid maxing out your card with a high balance. Keep credit utilization below 30% of your available limit.
- Diversify Your Accounts: As your financial situation improves, consider diversifying your credit accounts with personal or auto loans to show a variety of credit responsibilities.
By following these tips, you can effectively use your credit card to rebuild your credit history and work towards a more solid financial future.
Remember, patience and discipline are key to achieving long-term positive results.
Access the Capital You Need for Your Business
A credit card is not the only financing option for rebuilding your credit.
Business loans are an excellent alternative. Unlike credit cards, a business loan can provide you with much more cash to make larger investments. This will allow you to grow your business while improving your credit history.
At Camino Financial, we offer business loans ranging from $3,100 to $35,000.
The minimum credit score required to apply is 580. And one of our advantages is that we don’t require a previous credit history to apply.
Additionally, as we report to credit agencies, we can help you improve your score.
Our priority is to help businesses like yours improve their financial performance, so you can access better capital opportunities.
Apply for a business loan today!
