[Disclosure: Cards from our partners are reviewed below.]
A credit card is one of the best ways to build credit, but if you’ve mishandled one in the past, have bad credit in general or have yet to open a line of credit, it can be tricky to get one. (We know, it’s a classic credit Catch-22.) But tricky is not the same as impossible. There are credit cards designed for people in these situations.
What Credit Cards Will Help Me Build Credit?
First, it’s important to note that credit cards with less stringent underwriting standards generally fall into one of the following categories:
- Secured credit cards: These cards require an upfront deposit that serves as your credit limit. They’re extended to risky customers who are trying to build or rebuild their credit. The security deposit essentially serves as insurance should the cardholder prove they are a risk and fail to pay their credit card bills.
- Store credit cards: These branded retail cards reward loyal customers for their business. They aren’t specifically geared toward people with bad credit but tend to be easier to get than general-purpose credit cards, since most are only meant to be used at that brand and carry low credit limits.
- Gas credit cards: The concept’s similar to store credit cards, except the brand is a gas station chain.
- Student Credit Cards: Many major issuers offer starter credit cards designed for new credit marketplace entrants. These student credit cards also tend to carry low credit limits and tout features a young credit user might find appealing like rewards for paying your bill on time or maintaining a certain Grade Point Average.
It’s important to note that even with less stringent underwriting requirements you may not be able to qualify for every card category or card in a category. For instance, if you’re not a student, you probably won’t qualify for a student credit card. And if your credit is terrible, you’ll want to go straight for the cards designed for people looking to rebuild their credit (secured credit cards). That’s why it’s important to know where your credit stands before you apply. Our free credit report snapshot will show you two of your credit scores to give you an idea of what offers you’re likely to qualify for. Once you know where you stand, you can go here to get matched up with the right credit card for you.
Should I Get a Secured Credit Card?
If you’re saddled with bad credit, your best bet is probably a secured credit card. With a secured card, you are required to make a cash deposit, which secures you a line of credit. Your credit line is the amount of your deposit, minus any fees charged by the card issuer. You can use your secured card anywhere you can use a traditional unsecured credit card. After a year or so of steady on-time payments, your credit may improve enough to qualify you for an unsecured credit card.
Expert Intel: Be sure to choose a secured card that reports to all three national credit reporting agencies.
You should be able to qualify for many of the secured credit cards on the market, though some issuers may deny an applicant with a recent bankruptcy on the books. With that in mind, you can consider the Discover it® Secured. The issuer recently announced that Chapter 7 bankruptcy will no longer automatically disqualify applicants. That’s not a guarantee you’ll get the card, of course, but at least it’s encouraging. Here’s a quick rundown of the card’s major terms and conditions (see full agreement for all the details). You can find more options for secured credit cards:
Discover it® Secured
- No Annual Fee, cash back on every purchase, and helps you build your credit with responsible use.
- Your Secured Credit Card requires a refundable security deposit up to the amount we can approve of at least $200 which will establish your credit line. You will need to provide your bank information when submitting your security deposit.
- We will automatically begin reviewing your account starting at 8 months to see if we can transition you to an unsecured line of credit.
- Earn 2% cash back at gas stations and restaurants on up to $1,000 in combined purchases each quarter, automatically. Plus, earn unlimited 1% cash back on all other purchases - automatically.
- INTRO OFFER: Discover will match ALL the cash back you've earned at the end of your first year, automatically. There's no signing up. And no limit to how much is matched.
- Receive FREE Social Security number alerts-Discover will monitor thousands of risky websites when you sign up.
Card Details +
The Skinny: Reports to all three credit bureaus; requires a minimum security deposit of $200 and grants automatic monthly reviews starting at the eight-month mark that could result in the refund of your security deposit. It also offers rewards: Cardholders can earn 2% cash back at restaurants and gas stations on up to $1,000 in combined purchases each quarter and 1% cash back everywhere else.
Annual Fee: $0
Annual Percentage Rate (APR): 24.74% Variable on purchases & balance transfers
Do I Have the Option of Getting Approved for an Unsecured Card?
You’re talking unsecured credit cards here (read: no security deposit required) and, yes, a few of them are geared to people with bad credit. These cards don’t always carry the most favorable terms and conditions, but that’s pretty much true of credit cards for those with bad credit in general. The issuer is taking a risk, so an annual fee and higher APR should be somewhat expected. You’ll still want to read the terms and conditions of every card carefully so you don’t wind up with a fee-laden or predatory product.
In terms of unsecured credit cards, one of your better options is the Credit One Bank Unsecured Visa Credit Card, which depending on your credit score could carry a high annual fee and high APR. However, the card is one of the few cards out there available to people with bad credit that offers a reward perk. Here’s a quick overview (again, see full agreement for details).
Credit One Bank® Unsecured Platinum Visa®
- See if you Pre-Qualify without harming your credit score
- This unsecured card requires no deposit and can help build your credit
- Track your progress with free online access to your Experian credit score, terms apply
- Build your credit history—we report to the credit bureaus monthly
- Accounts are automatically reviewed for credit line increase opportunities
- Enjoy the flexibility to choose your payment due date, terms apply
- Receive 1% cash back rewards on eligible purchases, terms apply
- No need to fret—you’re covered by $0 Fraud Liability
Card Details +
The Skinny: No deposit required; automatic reviews for credit limit increases; allows you to see if you’ll pre-qualify without dinging your credit, and offers 1% cash back on gas and grocery purchases.
Annual Fee: $0 - $99 thereafter
APR: 19.74% - 25.74% Variable
What Are Retail or Gas Credit Cards? Am I More Likely to Qualify for One?
Store credit cards have lower credit criteria than a traditional credit card. You often receive a discount on your first purchase after signing up for the card, plus extra rewards and offers when you shop at that retailer. Similarly, a gas credit card is a specialized type of retail credit card. A gas credit card allows you to earn rewards for buying gas as well as for other purchases. These cards may also offer a discount at the pump in lieu of rewards. These cards vary in terms and conditions, but many offer a lower limit when you first become a cardholder, which is why you may be more likely to qualify for one.
Should I Get a Retail Credit Card or Gas Credit Card?
Store credit cards and gas credit cards are a bit of mixed bag. As a payment method or rewards vehicle, they’re best suited to frequent customers. And you don’t want to carry a balance on these puppies since most of them carry high APRs. There are certainly cards in both categories that stand out. But those cards may be more difficult to qualify for. Overall, they’re really an option to keep in mind if you find yourself unable to score a traditional credit card.
Use Your New Credit Card Responsibly
No matter what route you go, you’ll want to use your new card responsibly. That way you’ll be able to readily qualify for a better assortment of cards down the line. Try to charge only what you are likely to pay off each month. Otherwise, you will likely pay the price in hefty finance charges (a theme among cards that are for consumers with bad credit).
Remember, even making a couple of small purchases a month will help you to establish and build your credit as long as those payments are made on time. Doing so will you help to establish a positive payment record. For credit-building purposes, we recommend not spending more than 10% of your credit line in any given month. You can find more credit-building tips.
Jeanine Skowronski contributed to this updated article. It was originally published on October 21, 2014.
At publishing time, the Discover it® Secured and Credit One Bank Unsecured Visa credit cards 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. This content is not provided by the card issuers. Any opinions expressed are those of Credit.com alone, and have not been reviewed, approved or otherwise endorsed by the issuers.
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.