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When you have a bad credit score, it can be difficult for you to get a credit card, especially one with low fees and fair interest rates. However, one of the best ways to improve your credit score is to use your credit cards responsibly. Every time you make a timely payment to your card, you can help improve your credit score.
So what should you hope to get from a credit card when you have bad credit? Keep reading to understand what to look for.
Credit construction opportunities
If you have bad credit, you may find it difficult to qualify for an unsecured credit card. In this case, you may decide to apply for a secured credit card. All secured credit cards offer credit building options, as do most unsecured credit cards.
When you make timely payments on your secured or unsecured credit card, your good behavior is reported to the three major credit bureaus (Experian, TransUnion and Equifax). If you choose to use a secured credit card, it’s worth double-checking that your credit card issuer is compiling these reports to make sure you’re building your credit history. After all, your secured card can be automatically converted to an unsecured card if you make enough timely payments.
Secure cards work similarly, except you don’t borrow money to use a secure credit card. To open a secured credit card, you must make an initial cash deposit, which will become your credit limit. If you don’t make payments, your credit card issuer will require a deposit. The main attraction of a secured credit card is that you don’t spend money you don’t have – your own deposit acts as collateral for spending you make on the card.
Low fees
Typically, credit cards charge a fee. What these fees look like and how much they cost may vary by card. Most fees are associated with additional features, such as making overseas transactions, or act as penalties, such as late fees. But some cards require payment only for their use. Ideally, you should choose the one that charges the least commission.
Let’s take a look at the various fees commonly associated with credit cards:
- Annual feeA: Some credit cards require the user to pay an annual fee. This can range from 50 to hundreds of dollars. Generally, the higher the annual fee, the better the benefits.
- The late payment feeA: In case of late payment, you may be charged a fee.
- International transaction feeA: Credit cards usually charge an international transaction fee when someone makes a purchase overseas. This commission is usually 3 percent of the purchase amount. Many travel and bonus cards do not charge a transaction fee abroad, but it can be difficult to qualify for such a card if you have a bad credit score.
- Balance Transfer FeeA: When you transfer your balance from one credit card to a new one, you may be charged a balance transfer fee. This is usually quite small and only happens once when you do a balance transfer. You can expect to spend between $5 and $10 or between 3 and 5 percent of your transferred balance (whichever is greater).
- Cash withdrawal feeA: If you are withdrawing cash from a credit card, you may have to pay a fee.
Credit monitoring tools can help you keep track of your credit score and the progress you are making towards improving it. Try to find a credit card that offers these helpful tools to make sure you have the resources you need to improve your score.
Through the FICO Score Open Access Program, many banks and credit card providers offer free access to your FICO score, but some issuers provide even more extensive credit monitoring tools. The good news is that some of these credit monitoring tools are available to non-cardholders as well. For example, anyone can sign up for free for MyCredit Guide by American Express, CreditWise by Capital One, and Credit Journey by Chase.
bottom line
When you have a bad credit score, using a credit card can be a little intimidating. But building credit requires credit, and with a little research and planning, you can find a card that will help you reach your financial goals even if you have bad credit. Look out for credit cards that offer lending options, charge low fees, and let you keep a close eye on your credit score.
Editorial disclaimer
The editorial content on this page is based solely on the objective judgment of our contributors and is not based on advertising. It was not provided or ordered by credit card issuers. However, we may receive compensation when you click on links to our partners’ products.