Find Best Credit Card for Bad Credit
Responsibly using a credit card can be one of the best ways to boost a poor credit score. Unfortunately, few credit card companies offer desirable cards to people with bad credit. Instead, many companies target these consumers with unscrupulous terms, sky-high fees and low limits. However, savvy consumers with damaged credit can still find a credit card with reasonable terms.
Credit Card Red Flags for Consumers with Bad Credit
Before applying for any credit card, it’s important to carefully read the cardholder agreement. All fees, terms and conditions will be listed within this document. However, if you see any of the following fees or conditions listed, you should strongly reconsider applying for that card:
- No Grace Period: Most credit cards offer a grace period of 20 to 30 days before they begin charging interest. Credit cards marketed to people with bad credit may have a shorter or nonexistent grace period. Without a grace period, you’ll pay interest on your purchase the day after you make it.
- Triple-Digit Annual Fee:An annual fee of less than $100 may be reasonable for many credit cards for people with bad credit. However, any annual fee that reaches the triple digits probably isn’t worth the service it offers.
- Application Fee: Credit card companies shouldn’t charge an fee just to apply for credit. However, many companies do charge a fee that will be added to your first month’s bill.
- By-the-Minute Late Fees:Due dates are reasonable, but some credit cards have a due time as well. Some credit cards have a due time of 1:00 p.m., in addition to due date. For this reason, it can be easy to incur an accidental late fee.
Three Credit Cards to Consider
With dozens of credit cards available from banks, credit unions and credit card companies for people with bad credit, it can be difficult to choose the right card. Below are three cards that consistently earn accolades from financial experts:
- Capital One Secured MasterCard:This card requires a deposit of $49, $99, or $200 depending on your creditworthiness. You can add additional funds to increase your credit limit at any time, and you can graduate to an unsecured card after 12 months. The annual fee is $29.
- Digital Federal Credit Union Secured: Members of this credit union can qualify for a secured credit card with no annual fee and a reasonable annual percentage rate of 11.5 percent. It also doesn’t charge a cash advance fee, which is rare for most credit cards.
- BarclayCard Rewards MasterCard:This unsecured card has no annual fee and offers 1 to 2 percent back on some purchases. However, you’ll need a score in the low 600s to qualify under most circumstances.
Applying for a Credit Card with Bad Debt
Being denied a card can further damage your credit, so it’s important to know your credit score before you apply. A credit score in the 500s means you should focus on obtaining a secured credit card. A credit score between 600 and 650 will help you qualify for an unsecured card with high fees. A score in the 650s makes it likely you’ll qualify for many unsecured cards, but not cards with desirable incentives. Even though a 650 credit score may seem too high to be considered a bad credit score, lenders still consider this a sub-prime score.
Once you know your credit score and the cards you should target, read any cardholder agreement carefully. If you don’t meet the income requirements, or you see any red flags, look for another card. Remember, your primary goal should be obtaining a card that will improve your financial future, not hinder it.
- Avoid credit cards without grace periods.
- Bypass cards with high annual fees, application fees and unscrupulously calculated late fees.
- Consider secured cards if your credit score is in the 500s.
- Scores in the 600s can yield an unsecured credit card with reasonable fees.