Everyone makes mistakes. Financial missteps require more than an apology. That’s where credit cards for bad credit come in. They have lenient criteria for approval. These cards help rebuild your financial standing through responsible usage.
The best credit cards for bad credit report to all three credit bureaus. Some offer a path to graduate from a secured to an unsecured card, reclaiming your security deposit. Others require a minimal deposit or no deposit at all. We analyzed various cards from different issuers to compile a list of the top choices.
However, don’t solely rely on our list. Compare these cards to others in this category. Consider them beyond our recommendations. There is a wide range of options available. Our list might not include the best card for your specific credit profile or needs. Take a look at our selections below.
Petal® 2 “Cash Back, No Fees” Visa® Credit Card
The Petal® 2 “Cash Back, No Fees” Visa® Credit Card is designed to assist in building credit. It has no annual fees, no security deposit requirement, and offers rewards. Additionally, it reports to the three main credit bureaus and allows for a credit line increase after six months of on-time payments.
This credit card has a $0 annual fee and is unsecured. It provides immediate 1% cash back and up to 1.5% cash back on eligible purchases after 12 on-time monthly payments. Moreover, cardholders can earn 2% to 10% cash back at select merchants.
The standard APR for this card ranges from 17.99% to 31.99%, with a variable APR. Petal offers other benefits such as approval based on banking history, without requiring a credit check. The card also includes basic Visa benefits such as roadside dispatch, auto rental collision insurance, and theft coverage.
Please note that individuals with significant credit history issues may not be eligible for this particular version of the card. However, alternative versions like Petal 1 or Petal 1 Rise may have different attributes and eligibility criteria.
Discover it® Secured Credit Card
The Discover it® Secured Credit Card allows applications without a credit history, unlike other secured cards. After seven months, your account will be reviewed for potential conversion to an unsecured version, with a refund of your deposit if qualified.
There is no annual fee for this card, and it is a secured credit card. You can earn 2% cash back at gas stations and restaurants on up to $1,000 in combined purchases each quarter and 1% cash back on all other purchases.
For balance transfers, there’s a 10.99% intro APR for six months, followed by a 27.99% variable APR. The intro balance transfer fee is 3%, and future balance transfers may have up to a 5% fee (see terms).
Discover offers additional benefits, such as automatically matching all cash back earned at the end of the first year. The card provides monthly account reviews, starting after seven months, which may result in a deposit refund based on responsible payment behavior.
Capital One Platinum Secured Credit Card
The Capital One Platinum Secured Credit Card may grant a higher credit limit than your deposit. Depending on your credit profile, the credit line can go up to $200 with a minimum deposit of $49, $99, or $200. The card has no annual fee and is secured. It does not offer any rewards. The standard APR on purchases and balance transfers is a variable 30.49%.
Qualifying applicants can start with an opening deposit of $49 or $99, resulting in a $200 credit line. The initial deposit can be funded over 35 days in 20 increments instead of all at once. However, some applicants might be required to deposit the full $200. Upon approval, Capital One will inform you of your minimum deposit requirement for the card.
Petal® 1 “No Annual Fee” Visa® Credit Card
The Petal® 1 “No Annual Fee” Visa® Credit Card is a rare find – an unsecured credit card with no annual or account opening fees. Most similar cards target students and require proof of school enrollment, but the Petal 1 Card is open to everyone. This makes it an attractive option for those looking to build their credit without incurring unnecessary costs. With an annual fee of $0 and being unsecured, it provides flexibility and accessibility. Additionally, the card offers rewards of 2% to 10% cash back at select merchants.
However, it’s essential to be aware of the standard APR, which ranges from 24.99% to 34.49% variable APR. As with any credit card, it’s crucial to use it responsibly to avoid accumulating high-interest charges. On the upside, the Petal 1 Card comes with various basic Visa benefits, including roadside dispatch access and theft protection. Overall, for individuals not enrolled in school, the Petal 1 “No Annual Fee” Visa® Credit Card is a great choice for establishing credit and managing expenses without worrying about additional fees.
Tomo Credit Card
If you lack a meaningful credit history but are financially stable, consider the Tomo Credit Card. It evaluates your bank information and salary for approval, making it suitable for newcomers to the U.S. with a job but no U.S. credit history.
The card has an annual fee of $2.99 per month and is unsecured. There are no rewards or standard APR. However, it offers World Elite Mastercard benefits like credits from DoorDash, Lyft, and HelloFresh, a ShopRunner membership, and cell phone protection up to $1,000 per 12 months.
One drawback is the seven-day autopay schedule, which some may find restrictive. Despite that, the card’s overall perks and easy approval process make it worth considering for those building credit in the U.S.
Types of credit cards for bad credit
There are primarily two types of credit cards for individuals with bad credit: secured and unsecured.
A secured credit card mandates an upfront security deposit, typically matching the desired credit line. These cards have minimum and maximum deposit requirements. On the other hand, unsecured cards do not need a security deposit, but they often come with higher fees and interest rates. This is because the issuer takes on more risk without the deposit.
When evaluating unsecured cards for people with bad credit, exercise caution. While avoiding a security deposit may seem attractive, subprime products with unclear terms and expensive fees might not be the best choice. In the long run, it might be more beneficial to save up around $200 to meet the minimum deposit requirement for a secured card from a reputable issue.
Should I get a credit card for bad credit?
If you’re working on your credit, a credit card for bad credit can help improve it. Be aware of your options, differences, and how to use the card effectively to achieve your goals. Financial wellness relies on understanding your options, especially for those with blemished credit. Choosing the right company matters as it affects your financial future. Many people hesitate to seek help due to stigma, but finding reliable sources can save money and reduce stress.
Selecting a credit card for bad credit requires considering its support in your credit-improvement journey. Look for low or no annual fees, credit bureau reporting, and the possibility of converting to an unsecured card later. Jim Triggs, President & CEO of Money Management International, emphasizes the importance of being informed about available choices.
How to build your credit score with a credit card for bad credit
A credit card for bad credit provides a fresh start. Paying your bill on time is crucial for rebuilding credit. Additionally, try to clear your entire balance each month, which avoids debt accumulation and interest charges.
What causes a bad credit score?
Several factors can negatively affect your credit. One major impact comes from late or non-payment of bills. Excessive debt on your cards, maxing out credit limits, and applying for too many new lines of credit also drag down your score.
For newcomers to credit, achieving a high score is unlikely due to the short credit history. Another contributing factor is the credit mix, which includes the types of credit you have. Maintaining a mix of revolving credit (e.g., credit cards) and installment credit (e.g., car loans, mortgages) can improve your credit score if you pay your bills in full and on time each month.
How to apply for a credit card for bad credit
When applying for a credit card with bad credit, set realistic expectations. Cards with generous rewards often target those with excellent credit. Instead, focus on obtaining a card that helps improve your credit profile.
The application process for a credit card remains the same regardless of your credit score. Apply online through the issuer’s website by clicking the “apply now” links. Provide your identifying information, including full legal name, address, Social Security number or ITIN if required. Additionally, some basic financial information may be required, such as salary and debt obligations.
After applying online, you’ll typically receive a response within a few minutes. Keep in mind that applying for new credit leads to a hard inquiry on your credit report, which can temporarily impact your credit score. However, some cards designed for bad credit don’t perform a credit check, and this feature is usually highlighted on their main card page.
Credit cards to watch out for
Having bad credit might make you think any approved credit card will do, but it’s not true. There are good options for bad credit, like cards with low fees and rewards.
Avoid cards with high annual and account opening fees. Cheaper options are available. Stay away from cards that charge a fee for increasing your credit limit. Don’t choose a card with both an annual and monthly fee. Avoid cards with punitive interest rates. Look for ones with more reasonable APRs. It’s best to pay your balance in full and on time every month. But for bad credit, higher interest rates are common. Look for cards with more manageable APRs.
Are you able to commit to a secured card?
Secured credit cards typically offer favorable terms, like low fees and the chance to switch to an unsecured card. However, a major drawback is the mandatory deposit matching your desired credit limit. This deposit can be challenging to gather, with minimums ranging from $100 to $500.
If you manage to gather the minimum deposit, a good secured card becomes an ideal choice. But if you can’t, consider opting for an unsecured credit card as an alternative. Each option has its benefits and drawbacks, so choose wisely based on your financial situation.
Can you tolerate an annual fee?
Unsecured cards for bad credit often have an annual fee, compensating for no security deposit. However, avoid cards with extra fees, like account opening, management, or credit limit request fees. Such cards could be unnecessarily costly for obtaining credit.
Don’t apply to multiple cards at once
If you’re uncertain about getting approved for a specific card, avoid applying for multiple cards in hopes of one being successful. Each application results in a hard inquiry, which negatively impacts your credit score. A series of consecutive inquiries indicates to issuers that you might be stretching your credit limits.
How to pre-qualify for a credit card for bad credit
There are various online pre-qualification tools, but being pre-qualified doesn’t mean you’re approved. Pre-qualification for a credit card indicates a higher chance of approval but no guarantee. To avoid credit card application rejections with bad credit, visit an issuer’s site with pre-qualification or preapproval tools. These tools use a “soft” credit check, which doesn’t harm your score, to determine the likelihood of approval for a specific card.
