The Best Credit Cards for Bad Credit

A poor credit score reduces your chances of getting loans and credit cards, but it doesn’t rule them out completely. While you may be refused the best reward and cash back credit cards, there are still numerous cards aimed solely at bad credit borrowers.

What is Bad Credit?

Bad credit is generally defined as a credit score of less than 579. Modern variations of the FICO Score and VantageScore both span credit ranges of between 300 and 850, with 300 being the lowest and 850 the highest. If you fall below 579, you’re considered to have “Bad” or “Very Poor” credit.

According to Experian, one of the three major credit bureaus, 16% of American consumers fall within this “bad credit” range. It’s generally very difficult to get a credit score this low; it takes many mistakes and oversights, including missed payments, maxed-out credit cards, bankruptcies, defaults, and collections.

If you have lots of debt and are pushed to your limits every month with minimum payments, late fees, and penalty APRs, it’s very easy to fall into this trap and it can be difficult to escape. The good news is that a secured or unsecured credit card can help you to escape, improving your credit utilization ratio and your payment history, which impacts 65% of your credit score.

Secured vs Unsecured Cards

Both these cards have many credit building benefits and with responsible use, they can help you to attain good or excellent credit. The main difference is that a secured card requires a deposit and has a low credit limit, while an unsecured card doesn’t need a deposit and has a higher limit on average. 

In terms of rebuilding credit and using the card to make purchases online and offline, both cards provide the same benefits.

The Best Secured Cards for Bad Credit

Secured credit cards are perfectly suited to bad credit borrowers. A secured card works a lot like a prepaid card. You add money to the card in the form of a refundable security deposit and this deposit then becomes your credit limit. 

You can use the card to make purchases online and offline, and at the end of the month, you make payments to clear the balance. If you fail to cover those costs, the card issuer can simply take your deposit, which means they don’t stand to lose a single cent.

You can get the security deposit back after a few months, at which point your credit score will have improved enough for a higher credit limit.

Discover It Secured

The Discover It Secured is one of the few secured cards with a rewards program. You can get 2% cash back on purchases at gas stations and restaurants, and 1% on everything else. Automatic reviews kick-in after 8 months, at which point you may be upgraded to an unsecured credit card, and there is no annual fee.

The Discover It Secured card also offers online access and a free Social Security Number Alert, which warns you when you may have been a victim of fraud. Unlike unsecured Discover It cards, your points won’t be doubled at the end of your first year, but you can still benefit from welcome bonuses and other promotions once you switch to an unsecured card.

  • Credit Card Issuer: Discover
  • Annual Fee: $0
  • Intro APR: N/A
  • Regular APR: 24.49% Variable APR

Citi Secured Mastercard

The Citi Secured Mastercard offers a line of credit between $200 and $2,500, depending on how big your initial deposit is. There are no cash back rewards, but with responsible card use, on time payments and no late fee penalties, it can build a strong credit report in just a few months.

  • Credit Card Issuer: MasterCard
  • Annual Fee: $0
  • Intro APR: N/A
  • Regular APR: 23.99% Variable APR

OpenSky Secured Visa

No credit check is necessary for the OpenSky Secured Visa and you can deposit as little as $200 to open your account, with additional deposit options available beyond that. There aren’t many perks or rewards, but the sole purpose of this card is to build credit, so providing you pay by the due date and keep the card active for at least 6 months, you should notice some massive improvements.

  • Credit Card Issuer: Visa
  • Annual Fee: $35
  • Intro APR: N/A
  • Regular APR: 18.89% Variable APR

The Best Unsecured Cards for Bad Credit

An unsecured credit card offers a higher initial credit line and doesn’t require a security deposit. However, the lack of collateral means these cards typically charge higher interest rates. These are used by the lender to cover the increased costs stemming from defaults and charge-offs.

Capital One QuickSilverOne

Get 1.5% cash back on all purchases once you pay a $39 annual fee. Annual fees are not a welcome sight, but with this one, you only need to spend $2,600 to offset the cost. There are no balance transfer fees either, making the Capital One QuickSilverOne a great choice all round.

  • Credit Card Issuer: Capital One
  • Annual Fee: $39
  • Intro APR: N/A
  • Regular APR: 26.99% Variable APR

Indigo Mastercard

The Indigo Mastercard charges an annual fee and has a high-interest rate and no rewards, but when you have bad credit, your options are pretty limited. Applications are quick and easy, online servicing is available around the clock, and you can even choose your own card design.

Creditworthiness isn’t a concern with this card and you can get a pre-qualification without a hard credit check. There is also a mobile app to give you access to your account, allowing you to monitor all purchases and build good credit.

  • Credit Card Issuer: Mastercard
  • Annual Fee: $0 to $99
  • Intro APR: N/A
  • Regular APR: 24.90% Variable APR

Journey® Student Rewards from Capital One

The Journey Student Rewards Card is one of the best credit cards for bad credit borrowers seeking a higher credit line. It’s an unsecured rewards card, offering 1.25% on purchases, and it doesn’t have an annual fee. However, it’s only available for student cardholders. 

If you’re still a student or have only just graduated, apply now and reap the benefits. If not, take a look at one of the other options outlined above.

  • Credit Card Issuer: Capital One
  • Annual Fee: $0
  • Intro APR: N/A
  • Regular APR: 26.99% Variable APR

How to Apply for (and Use) a Credit Card with Bad Credit

If you have bad credit, you might be tempted to stick with your debit card, avoid applying for anything else, and focus on damage control. But a credit card can help you to steadily rebuild credit, as all providers report activity to the three credit bureaus (TransUnion, Equifax, Experian). 

This will make it easier to apply for all types of credit in the future and could help you get a mortgage or car loan.

Save Up

The more money you have put away, the easier it will be to secure a credit card and use it sensibly. A cash sum is needed for a refundable deposit (secured cards only), but it can also help you to establish an emergency fund. This fund can dig you out of trouble if you ever find yourself with more debt than you can handle.

Check Your Credit Score

Before you start looking for a new credit card, you need to know where you stand and what type of card you’re likely to qualify for. You can get a free credit report from all the major providers and use this to see what they see. You may discover that your credit score is not as bad as you thought it was.

Compare Cards

Don’t simply accept the first offer that you receive. It doesn’t matter how bad your credit card is, there are always lenders willing to take a chance on you. Shop around, compare, contrast, and calculate how the card’s features will impact you.

Foreign transaction fees don ‘t mean anything if you only use your card in the US, but could cost you a fortune if you travel a lot; cash advance fees can be crippling if you use your card at an ATM or gamble with it; penalty APRs can destroy you if you don’t meet your monthly payments on time.

All these things need to be considered in addition to how the rewards scheme works (eligible purchases, bonuses, reward categories), if there is an intro offer, and whether you have online account access, a free credit scorecard, and other worthwhile perks.

Apply

Many credit card companies have an easy application process you can use to pre-qualify without impacting your credit score. Once you have pre-qualified, you can finish the application, set your credit limit, and activate the card. If your application is refused, you can move onto another card, one with fewer requirements.

Spend Carefully

Once you have the card, you need to make sure you use it properly. Don’t spend more than you can afford, try to clear the balance in full every month and if you can’t, make those minimum monthly payments on time and in full. It will improve your credit score and could lead to an unsecured line of credit in the near future.

Bottom Line: Available Credit Cards 

Even if you have a poor credit history, you can get a respectable card, and while it might not offer you the best terms, it can be upgraded at a later date. Providing you have a checking account, a little cash, and a few minutes to complete an online application, you have all you need to get your new card, start building credit and look forward to that credit line increasing several months down the line.