We all make mistakes with money. Some of us just pay for it more than others. This is especially true of debt, which can cause the kind of bad credit that haunts us for years. Having bad credit means that it’s harder to get a car or home loan down the line.
But you have options.
One of the best ways to regain your credit score is through secured credit cards. Secured cards require you to pay a security deposit to start. In return, you gain access to a credit line that’s usually equal to the deposit. Since you take on some of the risk, banks are more likely to approve you for a credit line. At the same time, you’re able to improve your credit by gaining back the bank’s trust.
There are also regular, unsecured credit cards that cater to those with bad credit. While these cards work for certain situations, they often come with skyhigh interest rates. But for a short-term solution, these unsecured cards might be your only option if you have bad credit.
Read on to discover some of the best secured and unsecured credit cards for individuals with bad credit.
Capital One Secured Mastercard
Capital offers a secured credit card for those with poor credit that can help you get back on your feet. To use the card, you’ll have to make a minimum security deposit of either $49, $99 or $200. The lower your credit, the more you’ll have to pay. After you make the deposit, you’ll have access to a $200 credit line.
After making five on-time payments, you’ll be considered for a credit limit increase. You’ll also gain free access to Creditwise, which helps you monitor your credit score.
Keep in mind that secured cards like these are meant for the short term. APR is set at a high 26.99% so it makes sense to pay off your balance in full each month. Otherwise you’ll end up paying more in interest charges, which destroys the whole point of trying to keep your debt in check.
Discover it Secured Card
Discover it is the only secured credit card that offers cash back rewards on purchases. Make a minimum deposit of $200 and you’ll receive a credit line of equal value. Like most secured cards, the APR is high at 25.24% so it’s recommended that you pay off your balance each month.
You’ll earn 2% cash back from purchases at restaurants and gas stations and 1% cash back on all other purchases. The best part is that Discover automatically matches your points at the end of your first year. Reward points can be redeemed anytime at Amazon.com.
The Discover it Secured Card is perfect for those wanting a quick way to build up credit while earning rewards along the way.
OpenSky Secured Visa
The OpenSky Secured Visa is ideal for those lacking a bank account since it’s not connected to a checking account like most of the other cards on this list. However, the card comes with an annual fee of $35 so it should be kept to short-term use.
The card’s 19.64% is slightly lower than other secured credit cards, but not much lower. It also comes with a 3% foreign transaction fee, so this might not be the best card to take on your overseas vacation. OpenSky gives you the option to increase your credit limit but this will also cost you a fee.
Opening an OpenSky Secured Visa does not require a credit check, meaning your credit will not be impacted. This makes the card an excellent choice for those with few options but who need to repair their credit quickly.
Indigo Platinum Mastercard
The Indigo Platinum is tailor made for those with bad credit histories. Bankruptcies are not considered and you can get approval in 60 seconds. However, a series of fees makes the card a definite short-term solution. You will also need a “fair” credit rating to be approved
Indigo Platinum is an unsecured credit card so you won’t need to put down a security deposit in return for a $300 credit line. During the first year, you’ll pay a fee ranging from $0-$75, depending on your credit score. After the first year, this fee rises to $99, meaning a third of your credit line is eaten up by the annual fee. For this reason, you really should only use the card for one year. That’s plenty of time to build a bit of credit and move onto a better unsecured card.
As you can see, there are options for those with bad credit but they come with some inconveniences. High fees and interest rates haunt those trying to build credit. But if you use these cards as a short-term solution, they can be a valuable tool in your path to becoming creditworthy.