Credit Cards for Bad Credit Review

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Why Get a Credit Card for Bad Credit?

By now we’ve pretty well established the necessity to have a credit card in today’s financial world. If any doubt remains about reasons to have at least one credit card, have a look at our article Why Get a Prepaid Credit Card? It clearly enumerates some of the day-to-day reasons for having plastic in your pocket. Whether it's good or bad news, it's critical to know what is in your credit report. We recommend checking out our Credit Report Review for the very best ways to get your hands on that information.

Though prepaid credit cards will help you through checkout lines and with online shopping and travel reservations, they do nothing to build a credit rating for someone who has never used credit nor to fix the damage done by a few past financial missteps. Credit Cards for Bad Credit fill the gap between prepaid credit cards and the generally more desirable cards described in our Credit Card and Rewards Credit Card reviews. It’s easy to qualify for them even with a poor credit history or none at all and, most importantly, they report monthly to each of the three major credit reporting agencies so that successful use of them can eventually result in qualifying for better cards. They can even be the first step towards other credit opportunities such as an automobile loan or a home mortgage.

There are two distinct types of credit cards for bad credit. They are Secured Cards and Unsecured Cards. These are the essential elements of the two card types:

Secured Cards
With a secured credit card, the consumer sets the credit limit by making a deposit with the card issuer. Minimum deposits can generally be as low as $200 or $300 and can be as high as $5,000 or more. The deposit is collateral which secures the account and nearly eliminates any risk on the part of the card issuer. The credit limit for the card is the same amount as the security deposit. A user can increase his credit limit at any time by simply increasing the amount of money on deposit up to the card’s limit.

This is not to say that these are prepaid cards. Each month the user will receive a billing statement just like any other genuine credit card. At least the minimum payment must be submitted or the account becomes delinquent and penalties are applied. Using the card properly represents the loaning and paying back of money and reported as such to the credit reporting agencies. Only if a user were to default on the payments would the issuer resort to using the security deposit to liquidate the debt. Paying the card bill in a timely manner reflects positively on credit reports and failure to do so reflects negatively.

Unsecured Cards
As the name implies, there is not security deposit made to obtain an unsecured credit card. There are, however, generally very substantial limitations and charges associated with these cards. Credit limits often start as low as $250 but can typically be increased after a period of satisfactory usage. In addition to interest and high annual fees for these cards, you can expect rather high charges to initiate the account in the first place. In addition to being a tool to help establish or improve a credit score, these cards have the advantage of not requiring a security deposit but you pay for that advantage in higher fees and lower limits.

What to Look for in a Credit Card for Bad Credit

When shopping for a credit card for bad credit, keep in mind that the card should be regarded as a stopgap measure…this isn’t the card that you want to use for the rest of your financial life. Rather it should be used only until qualifying for a more advantageous card is a reality.

Following are the characteristics that should be considered when shopping for a credit card for bad credit:

Interest Rates & Features
Not surprisingly, the interest rate, or APR (Annual Percentage Rate) should be considered when choosing any credit card. There’s often a higher rate applied to cash advances than for purchase transactions, so if you expect to take such advances regularly, pay particular attention to that rate. To make the absolute most of these credit cards, it’s best to pay off the entire balance every month. Presuming that that you’re able to stick to that plan, the grace period can be even more critical than the stated interest rate. With a built-in grace period, interest charges for purchases can be completely avoided if the full account balance is paid monthly. Unfortunately, the purchase grace period doesn’t apply to cash advances. For such transactions, interest begins to accrue from the date of the advance.

Other Fees
Fees in addition to interest charges are a fact of life for credit cards for bad credit. You can expect to pay a fairly high annual fee for the card. Some cards also charge one time fees for creating the account. They may be called account set-up fees or program fees but whatever the name, they’re a charge required for the extension of credit. Use our side-by-side comparison charts to determine which card best meets your individual requirements.

Credit Limits
As discussed above, credit limits are essentially set by the consumer for secured credit cards based on the security deposit that is made. Make a bigger deposit…get a higher credit limit. It’s just about that simple but there are a couple of points to keep in mind. Most notably, any money put on deposit in such an account is essentially unavailable for withdrawal. Yes, purchases can be made against it and to an extent, cash advances can be taken but doing so involves paying fees and interest. Who would want to pay interest on their own money? Additionally, most credit card issuers don’t pay interest on the amount held on deposit. To actually withdraw the funds, the account must be cancelled and refunds generally take several weeks to be processed.

Features
The features of credit cards for bad credit tend to be very basic compared to cards that are harder to qualify for. They all provide the legally required protection against unauthorized use as well as online account access. Only two of the cards in this survey feature any sort of a rewards program and they are limited compared to more mainstream cards.

Help & Support
It’s unfortunate but, across the board, customer service for credit cards in this category is weak compared to other credit cards. The majority of help comes from online account access but fortunately, that’s usually all that is needed. Email is also available but talking to a real live customer service representative is usually limited to standard business hours. Automated telephone support is available for obtaining account information and to report a lost or stolen card around the clock.

Credit Cards for Bad Credit can be very good things when trying to establish a credit history or to repair a seriously flawed one. We’ve compared the best of these cards alongside one another in the above matrix. Take a look at the characteristics of each card to narrow your search. Then read the reviews of the cards that best meet your personal needs before making your choice. Remember that these cards are intended to be a stepping stone on the way to an excellent credit record and it’s a reasonable goal to expect to discard them in favor of a better option after a period of satisfactory use. At TopTenREVIEWS We Do the Research So You Don’t Have To.™

 
 
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Rank #1#2#3#4#5
10-9  Excellent
8-6    Good
5-4    Average
3-2    Poor
1-0    Bad
Applied Bank Centennial Secured New Millennium Bank First PREMIER Bank Centennial Unsecured
Applied Bank Centennial Secured New Millennium Bank First PREMIER Bank Centennial Unsecured
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Lowest Price
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Ratings
9.45
8.03
7.82
6.43
6.38
10
9
8
7
6
5
4
3
2
1
10.00
10.00
9.00
9.00
9.00
8.00
8.75
8.00
7.50
7.50
7.50
8.75
7.50
7.50
7.75
7.50
5.00
5.00
7.50
7.75
7.50
5.00
5.00
7.50
7.50
 
Card Type
Secured
  
Unsecured    
MasterCard
Visa
Interest Rates & Features
Purchase APR 9.99% 19.9% 19.50% 9.90% 9.90%
Cash Advance APR 9.99% 19.9% 19.50% 19.90% 19.90%
Penalty APR     19.90% 19.90%
Minimum Finance Charge $0.50 $0.50 $ .50 $0.50 $0.50
Purchase Grace Period None 25 days None 25 days 25 days
Other Fees
Annual Fee $50.00 $69.00 $59.00 $84.00 $84.00
Monthly Servicing Fee     $7.00 $7.00
Cash Advance Percentage 5% 3% 2% 3% 3%
Cash Advance Fee Limits $5 Minimum $5-$10 $1-$20 $5-$10 $5-$10
Late Payment $32-$35 $29.00 $20.00 $29.00 $29.00
Exceeding Credit Limit $32-$35 $29.00 $20.00 $29.00 $29.00
Account Set-up*    $35.00 $29.00 $29.00
Program Fee*     $95.00 $95.00
Foreign Currency Charges 1% 3% 3% 3% 3%
Credit Limit Increase     $25.00 $25.00
Credit Limits
Minimum Credit Limit $200 $200 $300 $250 $250
Increased Credit Available After Anytime Anytime Anytime 6 months 6 months
Initial Cash Advance Limit   10% of total LOC 50% 10% of total LOC 10% of total LOC
Increased Cash Advance After   90 days   90 days 90 days
Increased Cash Advance Limit   50% 50% 50% 50%
Minimum Deposit (Secured Cards) $200 $200 $300   
Maximum Deposit (Secured Cards) $5,000 $5,000 $5,000   
Interest Paid on Deposit   
  
Features
Zero Liability
24/7 Account Access
Free Account Alerts      
Rewards Program      
Financial Education  
   
Help & Support
Telephone Customer Support
Automated Telephone Support
Email Support
FAQ
*One Time Fee **After six months, this rate has a maximum of 18%