If you have bad credit and a poor FICO score, you might not believe that you can be approved for a credit card. In many instances, that isn’t true as there are several cards designed specifically to help rebuild your credit. Choosing one of the best credit cards for bad credit can improve your finances without having to pay steep annual fees or high interest rates.
Depending on your credit score, you might only qualify for a secured credit card that requires a security deposit and has a low credit limit. Despite these limitations, recurring card fees for secured cards can be cheaper than unsecured credit cards regarding application fees and annual fees.
This list will include the best unsecured and secured credit cards you should consider.
1. Platinum Credit Card from Capital One
Annual Fee: $0
After your first five months of on-time payments, Capital One will increase your credit score. Applicants with a credit score in the mid-500s reported receiving an initial credit limit of $300 that was increased to $500 after the first five months.
As a Capital One cardholder, you also get free access to the CreditWise program that monitors your credit score.
If you want to pay an annual fee of $39, you can apply for the QuicksilverOne that has a 1.5% cash back reward rate. To offset the annual fee, you will need to spend more than $3,900 a year to begin profiting from the purchase rewards.
2. Credit One Unsecured Platinum Visa
Annual Fee: $0-$99
Your annual fee will depend on your credit score. You can earn 1% on many purchases including gas, groceries, and digital services like the internet, cell phone, and cable tv subscriptions.
One benefit of the Credit One Bank Platinum Visa is that you can see if you pre-qualify before applying for a credit card. This saves a hard inquiry on your credit score in case you do not qualify for the card.
3. Milestone Gold MasterCard
Annual Fee: $35-$99
Your annual fee will vary on your credit score. The good news is that it will not be higher than $75 for the first year. If you only qualify for the $75 annual fee, that fee will be $99 each consecutive year. And, the interest rate of 23.90% regardless of what annual fee you pay.
The Milestone Gold MasterCard accepts applicants that have previously declared bankruptcy. There are no purchase rewards, but, Milestone allows you to pre-qualify for the card first and offers free Bill Pay.
4. Discover it Secured Card
Annual Fee: $0
Another good credit card for bad credit is the Discover it Secured Card. There is a refundable security deposit of at least $200 that matches your credit limit. After eight months, Discover will determine to upgrade you to an unsecured credit card and refund your security deposit.
You earn 2% cash back at gas stations and restaurants and 1% on all other purchases. As an added bonus, Discover will match your cash rewards at the end of the first year.
Discover will also monitor your FICO credit score for free.
5. USAA Secured Card Platinum Visa
Annual Fee: $35
USAA Secured Card Platinum Visa is a secured credit card that can be beneficial for members of the military and their family members. One unique twist is that your security deposit is placed in an interest-bearing certificate of deposit. Your credit limit can range from $250 to $5,000 with a matching security deposit.
If you plan to travel overseas, this is also one of the few credit cards for bad credit that doesn’t charge a foreign transaction fee.
Choosing the Best Credit Card
It can be well worth your time to research before applying for a credit card. According to a 2017 study, approximately 35% of credit card applicants with bad credit do not research credit cards before applying. This can mean a rejected application or choosing a card with high fees.
When applying for a credit card, there are several factors to consider:
- Application Fee
- Annual Fee
- Security Deposit Required
- Interest Rate
- Is payment history reported to the three credit bureaus?
- Purchase Rewards
While you should only apply for a credit card to improve your credit with on-time payments, you should pay attention to the interest rate. In case you do miss a payment, you will want to choose a card with a lower interest rate to minimize your finance charges.
You should also pay attention to the annual fee and application fees. These fees only make a card more expensive. Even if the card pays purchase rewards, you may need to spend more money than you have to offset the higher annual fee.
If you are deciding between two credit cards that do not offer purchase rewards, choose the card with the lower fees that you qualify for. Both cards will report your payment activity to the credit bureaus and the cheaper card saves you money in the process.
It is still possible to get a credit card with bad credit. The ones mentioned in this list are some of the best that will report your payment activity to the credit bureaus and have reasonable annual fees. Some of the issuers even allow you to pre-qualify for a card to save an unnecessary credit inquiry that can hurt your future application chances.