Credit Cards for Bad Credit

Secured and unsecured credit cards

There are two types of credit card options for bad credit, secured and unsecured. A secured credit card requires a deposit of a certain amount of money into a savings account, and the credit limit is often based on a percentage of the deposited amount. This deposit for a secured credit card acts as collateral, and funds are not used for regular payments. This is unlike a prepaid card, which draws from the funds you deposit and is not reported to credit bureaus. Most credit cards are unsecured credit cards. An unsecured credit card requires no deposit and is simply a revolving line of credit with a limit that you can borrow against.

Credit card details to look for with bad credit

• Secured credit cards: These can be a great tool for helping to build credit, but only if the issuer reports the credit history to the credit bureaus. Issuers will generally require a minimum security deposit, and some will even hold your deposit in an interest bearing account, such as a CD. Secured credit card providers may not require any credit history or have a minimum credit score for approval.
• Fees: Some issuers for both secured and unsecured cards may or may not charge annual fees, and some may even charge monthly service fees on top of an annual fee. Paying attention to all of the different fees can help you understand your total costs. Additional things to look for including any program or maintenance fees, application fees, transaction fees, and penalty fees, There may also be fees for optional services, such as fees for lost cards or credit line increases.
• Rates: Interest rates can vary significantly and can be either fixed or variable. Paying the full balance each month could help you avoid interest and to help maximize rewards if those are offered. Some issuers offer no penalties for missed payments, while some can increase your interest rates significantly.