Top Picks: Best Credit Cards for Bad Credit

By Gerri Detweiler
Personal Finance Expert
11/17/2010

Having bad credit doesn't automatically lock you out of getting a credit card. There are a number of credit card options geared toward consumers with bad credit. However, they have downsides: Expect to get a lower spending limit and higher interest rates than someone with excellent credit, and you'll probably have to pay an annual fee. But if you want the convenience of a credit card and you're looking to get back on track to rebuilding your credit, these are the credit card offers you have to choose from.

Your best strategy with these cards is to use them responsibly to build solid credit scores so that you can eventually qualify for more favorable rates and terms. This means keeping your balances as low as possible, charging only what you can afford to pay off at the end of each month, and making sure your payments are always on time.

What to watch out for: Choose a card that reports to all three of the major credit reporting agencies (all our featured cards do). You can manage your account impeccably, but if it's not reported in your credit reports, it won't reflect in your credit scores.

Orchard Bank Classic MasterCards®

Depending on your credit score, you'll be approved for either a secured (deposit required) or unsecured card through Orchard.

For the unsecured card, purchase and balance transfer APR is 14.9% to 28.9% variable, depending on your creditworthiness. Balance transfers get charged a 5% fee, which is high but comparable to most cards in this market. The card levies an annual fee of $35 to $74 the first year and $39 to $79 thereafter, depending on your credit rating. A processing fee of $0 to $39 applies, again depending on your credit rating.

The good news: Orchard's pre-approval process means you'll qualify for some credit card.
The bad news: Fees are on the high side, which is typical for the bad credit market.

Capital One® Secured MasterCard®

While not ideal for some, a secured credit card can be a great way to rebuild your credit and still give you the convenience of a traditional credit card. Here's how it works: You deposit $200 to $3,000 into the account and that becomes your credit line. If you want to increase your credit limit, make additional deposits up to the $3,000 cap. From there, use the card just like any other credit card. The card offers a 19.8% variable APR on purchases and transfers, though there is no transfer fee.

The good news: When you close your account, your deposit plus interest will be returned to you.
The bad news: You'll need to come up with a big deposit if your goal is to use your card for big-ticket purchases.

If you're ready to rebuild your credit, choosing the right secured credit card can help you do just that. The OPEN SKY Secured Visa Credit Card from Public Savings Bank reports to all three of the major credit bureaus. If managed responsibly, by making consistent on time payments and keeping your balances low, this card can be a great strategy for rebuilding and improving your credit scores. Or if you've never had a credit card, this card can help you establish a good credit history. You'll get a 14.25 percent APR on purchases, which is much lower than most secured credit cards offer. The credit limit for this card ranges from $200 to $3,000, depending on how much you choose to deposit.

The good news: Reports to all three credit bureaus. There's a $50 annual fee, but this card doesn't have setup or monthly maintenance fees that often accompany cards designed for those with poor credit.
The bad news: There isn't a grace period so interest starts accruing as soon as your purchases are posted to your account. Your secured deposit doesn't earn any interest.

Card Comparison Chart

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