Credit Cards for Bad Credit

What Are My Credit Card Options When I Have Bad Credit?

Many Americans find themselves in exactly the same place when it comes to their credit rating – not where they would like to be. How do people with bad credit get credit cards?

using credit card

Four Main Options

Consumers with poor credit generally have these options available:

  • Regular Credit credit card – high interest and can be shut down with a missed payment or change in consumer’s credit rating
  • Bad Credit credit card – high interest, no perks, limited balance amount
  • Secured Credit credit card – consumer pays deposit, fees, and has a limited balance amount
  • Pre-paid credit card – similar to a savings account but with high fees sometimes

The Culture of Credit

For years, Americans have been ensconced in the culture of credit. Credit cards are an entre’ to hotel and airline ticket reservations, and it’s darn near impossible to get a “free” anything off the internet without a credit card to prove age.

Consumers with less than stellar credit really worry about losing the access their plastic brings them because they understand how interwoven credit cards are in daily life.

There’s More Than Meets the Eye

It turns out bad credit credit cards are plentiful. Consumers with poor credit and even those with plain old bad credit have options available which will help them not only save face and remain functional in modern society and, if properly utilized, they can also help re-build a credit rating.

Credit cards for bad credit aren’t as user-friendly as regular cards, requiring higher interest rates and fewer perks for using them, but people who need credit cards with bad credit don’t have to feel like a red-haired step child in the world of credit.

Yes, They Do Exist

There is a credit card for people with bad credit. In fact, there are many to choose from. The important question to ask is which one is best for your situation. Consumers who need credit cards with bad credit can look to a couple of solutions which will help them back into the game and allow them to hold their head up in the process.

There’s Good News and Not-So-Good News

Pre-paid debit cards and secured credit cards are two sources of relief. But they differ from one another and the difference is important to understand. Pre-paid debit cards are, as their name indicates, pre-paid.

The consumer sets up an account and sends money to the credit card company. Then, when they wish to make a purchase, they can use the money from their account to pay for the purchase.

It’s like a savings account with a debit card option. The downside of these cards is that these cards do not provide any information to the credit bureau which will help with the consumer’s credit rating.

Secured credit cards are real credit cards, but they have an account with money securing the charges against the card just in case the consumer doesn’t make the payments.

This type of card can be very helpful in rebuilding a credit rating as they do report to the credit bureaus (TransUnion, Equifax, and Experian). As long as the consumer makes their payment on time and/or pays off the credit card occasionally, they can reap the benefits of an improved credit rating.

Both Pre-paid credit cards and secured credit cards charge fees. Actually, they can charge a lot of fees and a consumer considering their offers needs to be careful of those issues. Interest rates on the secured card can be high; however, if a consumer uses prudent spending habits with the card, the interest rate should remain reasonable.

Exactly Who Should Consumers Start With?

Some credit cards for poor credit offer customers competitive terms which can help with managing expenses while re-building a credit score. The First Premier Bank® Mastercard requires applicants to have a checking account and a $95 application fee/deposit, however, the approved applicant receives $300 in credit.

The card reports to the credit bureaus so good management of the card can result in an improved credit rating. And if the consumer closes the account with a zero balance on the card, their $95 deposit is refunded.

A Pre-paid card with good benefits is the Wal-Mart® Moneycard Visa. This card doesn’t require the consumer to have a checking account, doesn’t charge an issuance fee, offers 1% cash back on fuel purchases and can be used anywhere a Visa Debit® card is accepted.

Seek and Ye Shall Find

Consumers with poor or bad credit need only get online to find the credit card that will enable them to function in modern society. Often, a consumer’s credit union, bank, or current credit provider will help them find a card which will meet their needs.

The following credit cards and prepaid debit cards are for people with bad credit. They should strictly be used for rebuilding credit. It is important to keep the balances below 30-40% of the credit limit and make your payments on time every month. Having just one late payment or going over the credit limit even once can sabotage your efforts of rebuilding your credit and should be avoided at all costs.

Sometimes, credit scores falter due to unavoidable or unforeseen circumstances. Layoffs, wage-cuts, health issues and identity theft are just a few of the problems that can lead to a person having bad credit.

Unfortunately, once the damage is done it can be difficult to rebuild your credit, especially with new credit card laws making some lenders reluctant to extend credit to anyone who doesn’t have a perfect credit score.

Re-establishing Credit

Bad credit credit cards are specifically tailored to individuals who have poor credit and who want to re-establish a positive credit history. Most times, these credit cards have higher fees than those for individuals with good credit.

Also, the credit limits may be substantially lower. Even so, the purpose of these cards is not to rebuild credit, and as long as you make the payments on time and in full, your credit scores will rise.

Secured Credit Cards

Some bad credit credit cards offer a secured card option. This will allow you to make a deposit that will essentially become your credit limit. With secured cards, the interest rate is usually a bit lower, and the balance can be higher, as it is dictated by what you can afford to pay.

This option is excellent for an individual with higher income, but poor credit due to past circumstances, as it allows for higher credit limits even with the security deposit. A higher initial credit limit can help to boost your credit scores faster, provided that you manage your spending wisely.

Pay Attention!

Keeping track of balances and making sure you pay on time should be your highest priority when trying to re-establish your credit. This means you should take advantage of balance notifications your credit card company may offer. If possible, also consider using the automatic payment feature most of these cards provide.

In this way, you can be certain the payment will arrive on time, no questions asked. And by keeping your balance low (preferably below 30%) you’ll prove to potential creditors that you’ve learned how to successfully manage your credit wisely.

Lauren Ward
Meet the author

Lauren is a Crediful writer whose aim is to give readers the financial tools they need to reach their own goals in life. She has written on personal finance issues for over six years and holds a Bachelor's degree in Japanese from Georgetown University.