[Disclosure: Cards from our partners are reviewed below.]
One of the easiest ways to build credit is to use a credit card. Of course, you need to be able to get a credit card in order to use it and getting a credit card with bad credit can be a little tricky. But there are credit cards for no credit, and you can do several things to increase your chances of getting approved and make sure your new card has a positive effect on your finances.
How Do You Go About Getting a Credit Card?
To get a credit card, you need to have a Social Security number (or taxpayer identification number) and the means to pay a credit card bill (generally income). You also tend to need to have a credit history, because credit card issuers will evaluate your credit, along with your ability to repay debt, in the approval process. If you have no credit or bad credit, you may still be able to get a credit card, but you have to make sure you’re applying for the right card.
What Is a Secured Credit Card?
Secured credit cards are generally the easiest credit cards to get, which tends to make them the best credit cards for people with bad credit. The cardholder must put down a refundable deposit to secure a line of credit for the card, and that protects the credit card company from losses if the cardholder doesn’t pay. (They’ll take the deposit if you don’t make your credit card payments.)
The deposit, which may be anywhere from about $200 to $2,000, also serves as your credit limit. Though secured cards have very low qualification standards, you may still be turned down for a secured credit card. For example, people with non-discharged bankruptcies on their credit reports or no bank account may not be eligible for most secured credit cards. Check the card terms before you apply.
The deposit is really the only difference between secured credit cards and unsecured credit cards — they otherwise function the same way. Once you close your credit card (or upgrade to an unsecured credit card, if that’s an option), you’ll get your deposit back.
How to Choose a Credit Card to Build Credit
No matter what sort of credit card you’re looking for, you need to do some research before applying. Start by seeing where your credit score stands (you can see two of your credit scores for free on Credit.com) and use that information to help you compare credit cards you may be able to qualify for. Once you’ve narrowed it down, think about what’s important to you: Do you want a secured credit card that might let you upgrade to an unsecured credit card? Do you feel like the credit card’s annual fee is worth paying? Make sure you’re certain you want the card before you apply, because credit card applications can hurt your credit. Once you get a credit card, do your best to make payments on time and keep your credit card balance as low as possible so you can achieve your goal of improving your credit.
Our Picks for the Best Credit Cards for Bad Credit
Why We Picked It: Not only does this credit card have very limited fees (no annual fee, no foreign transaction fees and no late fee for your first late payment), it gives cardholders the opportunity to upgrade to an unsecured credit card. Discover starts automatically reviewing accounts for upgrade after seven months, and if you qualify for an unsecured credit card, Discover then refunds your deposit. You can also earn rewards with this card: 2% cash back on up to $1,000 spent each quarter at gas stations and restaurants and 1% cash back on everything else. Discover matches all the cash back you earn in your first year. The minimum security deposit to open an account is $200 and the maximum credit limit is $2,500.
Annual Fee: None
APR: Variable 23.99%
Why We Picked It: If you make your first five monthly payments on time, you can qualify for a higher credit limit without making an additional deposit. You can also pick your own monthly due date and method of payment. The minimum deposit is $200 (the maximum credit limit is $3,000).
Annual Fee: None
APR: Variable 24.99%
BankAmericard Secured Credit Card From Bank of America
Why We Picked It: Bank of America will review your account after 12 months and you may qualify to get your security deposit back and continue using the card as an unsecured credit card. The minimum deposit is $300 and the maximum is $4,900.
Annual Fee: $39
APR: Variable 20.49%
At publishing time, the Discover it Secured Credit Card and Capital One Secured MasterCard are offered through Credit.com product pages, and Credit.com is compensated if our users apply and ultimately sign up for these cards. However, these relationships do not result in any preferential editorial treatment.
Note: It’s important to remember that interest rates, fees and terms for credit cards, loans and other financial products frequently change. As a result, rates, fees and terms for credit cards, loans and other financial products cited in these articles may have changed since the date of publication. Please be sure to verify current rates, fees and terms with credit card issuers, banks or other financial institutions directly.