If you have bad credit or even no credit, it does not mean you cannot obtain a credit card. You may qualify for a Sub Prime Credit Card, one where you will pay higher interest rates due to your poor credit and thus, being a greater credit risk for the card issuer. As you will learn in this article, there are many options available to you, in fact, the market is quite large. Nearly all of them are expensive, however, some are better than others. There are many advantages to using such cards, even if they are expensive. Foremost, is using these cards wisely can improve and build your credit. Don’t let high interest fees worry you, as there are ways to avoid paying high interest. If you have bad or no credit, you must accept the fact that there are tradeoffs you’ll have to accept if you want a credit card or want to improve your credit.
The Advantage of Secured Credit Cards
For lenders, issuing a credit card to someone with bad credit is risky. To lessen their risk in offering cards to people with poor credit, credit card providers created secured credit cards. Lenders reduce their risk by requiring cardholders to make a monetary security deposit up-front to secure the credit limit. If a cardholder fails to make payments, the lender keeps the security deposit. Secured cards generally have credit limits that range between 100 and 200 percent of the security deposit amount.
Bad, or poor credit means having a low credit score. Credit scores are based on what’s known as a FICO score. FICO is the best-known and most widely used credit score model in the United States, and is the FICO score is calculated statistically, with information from a consumer’s credit files. A FICO score below 600 is considered low and is regarded as poor credit score. A FICO score of 700 or above is considered a very good credit score. A score of 740 and higher is considered excellent.
Improving Your Credit Score
Using a credit card and making payments on time is one of the most direct ways to improve your credit. Keep in mind, people with poor credit may pay with higher interest rates and fees for credit cards for than those with good credit. Credit cards with higher interest rates will not necessarily affect you negatively if you use them wisely. If you pay your balances off in full each month, you will not pay any interest. By using the card instead of cash, and then paying off the full balance or keeping balances low, you will build and improve your credit.
The following list highlights some of the best cards available to those with bad credit.
Orchard Bank MasterCard
Designed for use in rebuilding your credit. Secured and unsecured options are available.
Unsecured card offers interest rates from 14.99 to 24.99 percent.
Secured card offers interest rate of 7.99 percent. An up-front payment of $200 is required.
Both cards have annual fees ranging from $0 to $59. There are processing fees ranging from $0 to $59.
Capital One Secured MasterCard
Secured MasterCard designed for those with bad credit. Annual fee of $29. Variable APR of 22.9 percent. Minimum up-front security deposit is $49. Credit limit ranges from $200 to $3,000. You may increase the credit limit by making an additional security deposit.
BankAmericard Secured Credit Card
A Bank of America secured Visa card designed for people with sub-par credit. An up-front security deposit is required. Annual fee of $39. Variable interest rate of 20.24 percent. Credit limit varies, based on your income and the amount of your security deposit. Credit limit ranges from $300 to $4,900.
Applied Bank Gold Visa
Two types of secured Cards are available. Approval for the cards is guaranteed.
A Gold Visa card (credit check not required). APR with a fixed rate of 9.99 percent.
A Platinum Visa card with 0 percent APR (but requires a good credit score to get the rate).
Both offer limit ranges based exactly on your security deposit from $200 to $5,000.
Open Sky Secured Visa
A secured Visa card with a credit limit determined by the security deposit ranging from $200 to $3,000. No credit check is required for approval. Annual fee is $50. APR is a variable 14.25 percent and can go as high as 18.25 percent on missed payments or by exceeding your credit limit.
Credit One Visa Platinum
An unsecured credit card tailored for those with poor credit. Starting credit line is $1,500. Credit limit may increase automatically with a good history of payments. APR is 23.90 percent. Annual fee is $75 for the first year, $99 after.
As mention earlier, there are tradeoffs and you have to decide what’s acceptable in terms of interest rates and fees. If building credit is your primary goal at the lowest cost, look for a card with the lowest flat annual fees, and of course, you can avoid paying interest by paying off the balance in full each month. If you need a card to make purchases that require a card, a prepaid card might serve you better. These do not come with the same types of fees. Keep in mind, they do not count towards or help to build your FICO score, and this may be a disadvantage to you if you need to improve your credit.
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