If you’re looking to get a credit card, you may worry about your bad credit. While people with poor credit history might not be approved for every card out there, you can still find a variety of options available to you. It can be easy to apply for credit card with bad credit, but it does take some research and time to find the right card for your needs.
Secured and subprime cards are designed for people with no or bad credit and can also help you build up your score to open more financial opportunities because these card companies report to all three major credit bureaus.
How Secured Cards Work
Secured credit cards work like all other credit cards, but the caveat is that you submit a security deposit, usually equal to the credit limit, before you open the account. Once the account is open, you can use the card like you would an unsecured credit card. However, if you default (don’t repay what you spend), the lender can hold the security deposit to help cover the debt.
As with unsecured credit cards, you must pay the minimum monthly payment, which is based on how much you spend. You also get charged interest if you carry a balance from one month to the next. It’s important to make your payments on time because that shows a good payment history on your credit score.
Many times, these companies allow you to increase your credit limit and, after a period of time making on-time payments, you could be eligible for one of their non-secured credit cards.
These cards are available to almost every applicant because you pay a deposit, so there is little to no risk for the issuer.
Apply for Credit Card with Bad Credit Using Subprime Cards
You can also apply for credit card with bad credit by applying for a subprime card like the FingerHut Credit Card. These cards are unsecured and are designed to help people with bad credit. However, there is no security deposit, which means you are likely to face substantial fees to use the card, such as processing fees, monthly/annual fees, and possibly fees to pay your bill. You can also expect to pay very high fees for cash advances.
Interest rates are likely going to be higher with subprime cards, and you’re also likely to have a small credit limit to start. However, as with other credit cards, you can raise your credit limit over time by making the minimum monthly payments on time. Usually, this can take up to a year of making on-time payments. You might also qualify for a different credit card with fewer/no fees and lower interest rates.
What Is Best for You?
While no one can answer that but yourself, there are ways to determine which type of credit card is best for you. Make sure you ask yourself how often you’ll use the card/how much you want to spend, do you have the money for a security deposit, and whether or not you want to build credit by using the card.
If you don’t have the money for a security deposit and don’t want to ask friends or family, you may want to save up the money before applying for the card. It’s always best to find the card with the lowest interest rate possible (APR), as well as the fewest fees.
If you plan to use the card a lot, such as on a trip, you may want to skip the subprime cards because they usually have lower lines of credit with high fees, which can result in less spending power. However, if you’re worried about over-spending, these cards could be suitable. Regardless, you have many options to consider if you want to apply for credit card with bad credit. Here are some other articles you might find helpful:
Here are the 7 best credit cards for low income earners
Looking for store credit cards for bad credit?
Credit cards 101 – the pros and cons of balance transfers
Can you get cash off credit cards? Here are 7 things to know