Best 5 Credit Cards For Bad Credit in 2020
Credit Cards are seen by many as a necessary evil, even after the CARD act of 2009 which regulated access to credit cards in the US, it is still incredibly easy for almost anyone to get their hands on a traditional credit card. The problem relies on the fact that most individuals are not prepared for the responsibility of dealing with a credit line and they usually overspent or simply put themselves in a bad position for not repaying their card on time….. or at all!
If you are reading this article it is very probable that you’ve had a credit card before and that your current credit score is holding you back from being able to acquire other credit products. It is important for any individual to understand that their credit score is a living organism that can change and mutate based on the situation and also on how you take care of it. Even if you have a damaged score with many scratches and dents, it will always be possible to aim for a better score if you start following a responsible and smart track.
One of the most common ways individuals aim to improve their score is by getting credit and taking care of it. The problem with this is that in reality, it is easier said than done, mostly because not many institutions will be willing to risk their money by lending it to you. One of the most straightforward ways on which you can get a credit card if your credit score has been damaged is by getting a secured card, this type of card will be covered with a collateral deposit of the card’s limit. This model allows financial institutions to de-risk and to allow individuals to gain access to credit cards again since the overall risk has been minimized to almost zero.
Keep in mind that there other options like unsecured cards with small limits under $500 that can allow you to get a card without a security deposit, but it would require at least a relatively better credit score.
There are many different reasons that can make any individual interested in a credit card besides improving their credit score, in this article we will be covering the best options available to anyone with a bad credit score. Please be aware that if your intentions are to use the card to improve your score, you should treat it just like a traditional card as it can otherwise damage your credit score even more.
What is a Secured Credit Card?
If you have had problems with your credit score over the years, it is very probable that most institutions will reject your application for any type of credit lines and especially credit cards. The core reason for this is that if you have had previous encounters with defaults and other negative situations, it is highly probable that you will fall for them once again.
Building up a credit score is not easy and it will take time and effort. A pretty common practice used to improve a credit score is to apply for a secured credit card, this type of card will allow almost all individuals to get a credit card. The main difference of this type of card is that in order to apply you will have to deposit cash as security for the total amount of your credit line. Many experts and advisors usually fight about this topic since many of them do not consider secured cards as real credit lines.
The money deposited will act as collateral and the last resort to cover all the charges and expenses of your credit card. It is extremely important to mention that even though there is money acting as collateral, you should treat these cards as if they were traditional credit cards. If you encounter problems repaying your card, you would be damaging your credit score to the point of no return. Even though it is a great way to recover a damaged score, it is key for any individual looking at it as an option, to truly respect it.
Another point worth mentioning is that in order to improve your credit score you should not only make sure to cover all the payments in time, but you should also avoid at all cost to exceed in the usage of your card. Most secured credit cards usually have a pretty tight and small limit, it is extremely important to avoid utilizing more than 30% of your max available balance at any time. This will ensure you the best path towards improving your score.
There are many reasons why an individual might be interested in getting a secured card these are some of the most common
Pros and Cons about this type of credit card
Best Credit Card For Individuals With Bad Credit Score
1. Discover – it | Overall Best Credit Card for Bad Credit
One of the most common misconceptions about secured cards is that people believe they are less than a traditional credit card. While this might be the case for certain providers, it is definitely not the situation for Discover as it presents even more benefits than most traditional credit cards.
Discover started as a payment company and has grown to become one of the most important card providers and online banks in the US. If you lean towards utilizing a Discover card you can be certain that it will probably be the overall Best Credit Card of the Market, because of their personal service and also their privileges.
If your personal goal is to improve your credit score then you should consider Discover, not only you would be able to improve your score but you will do so while enjoying from cash back on all your purchases and also great discounts. The firm understands that most individuals interested in a secured card are interested in rebuilding their credit, for this reason, it will automatically recalculate your score to let you know once you become eligible for unsecured products. The idea behind this is to allow individuals to remain under the brand of Discover, even after they’ve improved their credit enough to apply for the products of other firms.
Chances are you might want to get a card from another payment network like Visa or Mastercard, but it is important to keep in mind that Discover is without a doubt one of the very best providers and firms currently available in the US.
APR: Variable 25.24%
Intro APR 10.99% (6 months)
Credit Card Type: ***Secured***
Minimum Credit Score: Poor FICO (350 at least)
Annual Fee: $0.
- CashBack: Many cards offer access to cashback on purchases but in reality, the fine print tells a different story. With Discovery you will be able to take advantage of 1% cashback on all purchases and also a 2% on certain transactions like buying Gas or Restaurants. The whole process is automatic and the returned money will be deposited in your account right after the payment.
- Credit Bureaus Reporting: Many institutions offer secured cards as a method to improve credit scores but when it comes to reporting the cards to the credit bureaus and agencies they actually report them with a notation of the nature of the card. If the reason to get the card in the first place is to improve your score, then you should take extra measures to make sure that the chosen card will be reported as a traditional credit card with no annotations. Discovery will make sure to report your cards with no notes, this will be taken as if it was a regular credit card and it is the main reason why it will help boost your score.
- Initial Payment: The main problem with Discover is that even though they are a considerably large online bank, the firm still has to deal with the problem of how individuals can deposit their money in order to open an account. In order to get your card, you will have to deal with the hassle of utilizing an existing bank account with the firm in order to make the deposit if you are not an account holder of Discover you might find the entire process too complicated.
2. Capital One – Mastercard – Best for Low-Security Deposits
Before talking about the credit card it is important to understand the issuer, in this case, Capital One is a well known online bank in the US. As part of their online business model, the firm offers its services to all states in the country, making it the go-to option for many individuals.
The Capital One Mastercard Secured Card is one of the best options in the market, as you already know a secured card would require a security deposit of the full amount of the card’s limit, Capital One does things a little bit different as they only charge a deposit of $49 for $200 of limit. Compared to other options in the market this credit card is a great choice for anyone truly interested in improving their credit score and also to leverage their limit.
Keep in mind that in order to unlock a higher limit you will have to wait a certain period of time. Depending on how damaged your credit score is, it might take you up to six months to prove the bank that you are indeed taking care of your credit before they allow for further credit.
If part of your plan is to apply for an unsecured card down the road, then Capital One might be your best option as the firm promotes a program to “rehabilitate Credit”.
APR: Variable 26.99%
Credit Card Type: ***Secured***
Minimum Credit Score: Poor FICO (350 at least)
Annual Fee: $0.
- Leverage: The firm allows for secure payments to be as low as 25% of the card limit, this is not a common practice and it is key for individuals not to try to take advantage of it. The idea behind getting a card back is to avoid putting yourself in the worst position and to improve your credit situation. As mentioned before, if you are not ready to face the responsibility of utilizing a credit card you might be better off with cash until your situation improves.
- Bankruptcy: Even though the firm allows individuals with a very damaged credit score to apply for certain services, there are exceptions that will automatically get you a rejection letter. If you have previously filed for bankruptcy it is very likely that you would not get accepted and that you will have to wait for the 10 years minimum for it to disappear from your credit score.
3. Total – Visa | Last Resort to get a Credit Card
Total is the credit card brand of the Bank of Missouri which is a relatively small bank with assets of under $1.5 billion as of December of 2018.
It is important to understand that if your plan is to get a credit card simply to improve your credit, this might be one of the only possible options where an unsecured card will be given to low credit score individuals.
You won’t be doing business with a name like Chase or Citi, and this is something you have to keep in mind as the overall service cannot be compared. You want to have access to some of the most rudimentary tools that most banks offer in the country and the reason for this is the actual size of the bank. The overall service might not be bad, but it is simply basic and plain.
After doing some research it was easy to find that almost 92% of all applications are accepted, but the approval rating and the overall review was terrible. Most individuals had problems with their cards since the very beginning. Even though the firm uses a Visa membership, it has become known for scammers that this type of cards do not have high-security mechanisms and are usually targeted for that same reason.
APR: Variable 34.99%
Credit Card Type:***Unsecured***
Minimum Credit Score: Poor FICO (500 at least)
Annual Fee: $75 Additional
Fees: One Time Program Fee $89
- Security Deposit: Since the Total card is an Unsecured credit card you won’t have to do a security deposit to act as collateral for the credit line. If you are low on cash this might be a great option to access a credit card without incurring in extra deposits.
- Limit Increase: If you get to complete six billing cycles without incurring in any problem you will be able to apply for a higher limit. Take into consideration that credit bureaus take into account the amount of credit available and the usage.
- Credit Reporting: Total will report the credit card as a traditional card, this will ensure that even if not used you will be able to improve your credit score. It is understandable that you might feel afraid of utilizing your card, especially if you’ve had bad experiences with credit cards in the past. Having said so it is important for you to use it as the repayment is what will help improve your score. The best advice I can give you is to try to use your card for one or two small payment and then pay it back. This will ensure that you will no have a carrying balance and that all payments will always be on time.
- Fees…Fees…and more Fees: The worst problem with this type of card is that the firm will charge you fees for everything, and I’m seriously not exaggerating! It will only take 5 minutes to read their prospects to understand all the charges that you will encounter with this card, from one of the highest annual fees in the market to simply a first-time membership program of $89 dollars paid directly with the balance of your card.
- APR (High Fees): If you ever find yourself carrying a balance on your card you can can easily end up paying more than triple of the average interest rate of any other credit car. This makes Total one of the most expensive options when it comes to financing.
4. Open Sky – Visa |Best Card for Credit Building
OpenSky is not as famous as some of the brands from this list, but it is important to understand that this is a firm that takes pride in giving individuals a second chance to help their credit score. This might be one of the only places where you would be able to get a credit card without even a credit check, the reason for this is that all individuals will be considered as if they had the worst possible credit score.
It’s important to mention that this is a company that will report directly to the top 3 major credit bureaus and not simply to FICO as some others do. The firm understands deeply that their business is not only to lend credit but to allow for individuals to change their credit score and with it their lives.
APR: Variable 19.64%
Credit Card Type: ***Secured***
Minimum Credit Score: Poor FICO (350 at least)
Annual Fee: $35
- No Credit Check: Chances are that life hasn’t been easy for you and your credit score is full of holes and dents, having to apply for a credit card or any type of credit line knowing that your odds are against you is not only stressing but heartbreaking. With Opensky even individuals with big stains like bankruptcy would be able to get a credit card. Keep in mind that while credit score won’t be a showstopper to apply, you will have to prove that you meet the income standards for your card limit.
It is important to mention that OpenSky focuses on delivering a very average and simple product, their service might not be as good as the one offered by other big names but it certainly won’t disappoint. If you are focus on improving your credit score it should be more than enough to start.
- Annual Fee: This is a very straightforward card and service, there aren’t many cons with the product but it is important to understand that the card will charge a $35 annual fee for the Visa membership.
5. Deserve – MasterCard | Best For International Students
Deserve offers credit cards for individuals that otherwise would have a hard time getting one. The main target of the company are individuals with either a relatively low credit score or simply an unexisting one, hence why these cards are so popular for international students living in the US.
This is a firm that will help you build credit if you don’t have one, and will also improve yours if it has been previous damage. The core of the company is to provide a service very similar to what Discovery offers but without even having to request a Social Security Number.
Since the firm will report directly to the 3 major credit bureaus in the US, this might be your best option to start building credit if you have recently moved to the Country.
APR: Variable 24.99%
Credit Card Type: ***Unsecured***
Minimum Credit Score: Fair FICO (650 at least)
Annual Fee: $39
- High Cashback: This is one of the only cards available in the market that will offer a cashback of more than 3% on certain types of expenses like travel and entertainment. The firm will cover up to $500 worth of cashback on every billing cycle.
- No Credit History Required: Even for a secured card most companies will require an individual to have an existing credit record (even if it is bad), the idea of this is for financial institutions to understand better who they are doing business with and also to know the risk associated with the individual. Deserve does it differently by allowing individuals without a credit history to apply for an unsecured credit card to $5000 in the limit. The idea behind this is to provide newcomers with the opportunity of building their track record while having access to a credit line.
- Besides having to pay a relatively high Annual Fee there aren’t many drawbacks of this card. In synthesis, they are not offering anything new or anything special besides giving cards to individuals that would be rejected in any other institution. Keep in mind that this is not a card you would want to keep as you the only card since there are better options once your credit has been built. Don’t forget that having old credit lines with years of existence provides a good reference to credit bureaus. Even if it means having to pay the $39 a year to keep the card, it is not a bad an idea to do so in order to have a long time reference already working.
Even though certain individuals might want to get secured cards in order to get access to the benefits of a credit card without the full responsibility, it is imperative to treat them just like any unsecured card. The reason for this is that when it comes to credit bureaus, it will affect your credit score just as much as a regular credit card would.
While getting a card sounds like a good option to improve your credit score, it is not the only path. Disregarding how bad or how great your score is, there are many ways one can choose to improve a credit score. The best advice I can give you is to take your time and analyze your current situation, including your finances and also any type of debt you might be still holding in order to make any desition based on the whole picture.
Having a bad credit score might be your presentation card when it comes to a financial institution but it should not define who you are an individual. Never forget that just like you can change your life if wanted, you can do a lot to improve your credit score and get a fresh start. This process might not be easy and fast, but it certainly is full of benefits if you have what it takes to embark in the journey.
Glossary of Loan Terms
1. Is it possible to improve a credit score by using a secured credit card?Yes! But it is not as easy as it sounds. You should always keep in mind that fixing a credit score is not about showing you are capable of maintaining proper management of your finances over a short period of time but in the long run. This is something that will take time and effort from your side to truly work. While a Secured Credit Card is a great starting point, it should also be considered as an option once you are comfortable with your finances and you know you have the capability of sustaining your finances outside of using cash. One of the key elements of succeeding and improving a credit score with a credit card is to never exceed the usage or to max the available funds at any point. Failing to do this will only result in even further damage to your credit score as it will raise flags to your financial situation and your necessity of more money to sustain your lifestyle. Even if it sounds difficult to understand, sometimes the less you need credit the better it will be. The reason for this to work this way is that it proves that you are liquid enough of not needing to access credit in order to sustain your spending.
2. How much are the deposits to request a secured credit card?Keep in mind that this will differ from institution to institutions, but in most cases, you will be asked to cover 100% of the credit line. This means that if you have a limit of $3,000 on a secured credit card you would be asked to deposit the same amount as collateral. Most institutions will not even issue a secured card over $5,000 and in rare occasions up to $10,000. If you are in need of a higher credit line you might want to look into other security instruments like secured loans.
3. How can I get my deposit back?Your deposit will be kept until the account has been closed and all the balance of the card has been paid in full. Please note that even if the card has been paid entirely and the account has been closed, certain institutions might take up to to 5 business days or one week before they unlock the funds. It is important to ask this question directly with your card provider in order to be on the same page and to manage expectations accordingly.
4. What's the minimum credit score for an unsecured credit card?This is another question where the answer will be tight to the issuer of the card. While certain institutions will no give a credit card to anyone under a Good FICO category, other names will even issue cards for individuals with very Poor FICO Scores. Take your time to review all your options before choosing a credit card provider. While reviewing cards for this article I found that on Average an individual with a Score above 350 will be able to access some sort of secured card.
5. How does APR works on secured credit cards?Keep in mind that a secured credit card will work just like a regular credit card, this means if you carry a balance on them you will pay interests on it. Keep in mind that the biggest changes when it comes to the interest rates is that due to the high risk of your profile you will be charged with incredibly high rates. If you are using a secured card as a method to build and improve your credit score it is recommended to avoid leaving balances as you will affect your credit and you will have to pay these obscene rates.