The Best Credit Cards for Bad Credit
A card to help you rebuild your credit
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The best credit cards for bad credit are the ones that help you reliably bulk up your credit score until you're able to graduate to card with better terms, be it a lower APR or bigger rewards. Our top picks are all cards that encourage on-time payments by giving easy access to your credit score — and a couple even come with cashback perks.
Earn 2% cash back on restaurants and gas (up to $20 per quarter) and 1% on everything else. Balance transfers get an intro APR of only 10.99% for the first six months, and you can track your FICO score with every statement.
Pay as low as $49 for $200 of credit.
Credit One Bank® Unsecured Visa® for Rebuilding Credit
No security deposit, plus the chance to earn cashback rewards.
Truth be told, the best credit cards are designed for people with good or excellent credit scores. If you’ve got bad credit, you might feel like you’re locked out of opportunities to even access a credit line and rebuild your credit history, let alone earn perks like cashback rewards.
The good news: Many lenders offer what are called “secured cards.” You secure the card by making a cash deposit, and in return get access to an equivalent line of credit. After you prove that you can use the credit responsibly (usually over the course of a year), you can get your deposit refunded. From there, you can graduate to a standard credit card with a higher credit limit and better terms, like a lower interest rate or better rewards.
Our favorite is the Discover it® Secured Credit Card - No Annual Fee*, which gets you 2% cash back on purchases at restaurants and gas stations, and 1% on everything else. It also shows you your credit score along with every statement, so you can watch it climb as you make payments on time or in full.
The Capital One® Secured Credit Card is another good option, especially if you don’t have a lot of cash lying around. Rather than pay a deposit that matches your line of credit, you pay $49, $99, or $200 to earn an initial limit of $200, which increases if you make your first five payments on time. You get access to more credit and your credit score will steadily improve until you find yourself eligible for some of the best low interest cards, best travel cards, best rewards cards and more.
Other lenders offer unsecured (aka standard) credit cards designed specifically for people with bad credit. With these cards, you don’t need to make a deposit to get your line of credit — but you still need to use that credit responsibly in order to build your credit score (and avoid the higher interest rates that are typically baked in). A good card to consider is the Credit One Bank® Unsecured Visa® for Rebuilding Credit. It has an average APR of 19.74% – 25.74% variable and opportunities for cashback rewards, but be forewarned: It comes with some tricky fine print you’ll want to make sure to read (and agree with) when you get pre-qualified.
How We Chose the Best Credit Cards for Bad Credit
There aren’t a lot of credit cards for bad credit out there, which meant we were looking at a limited pool of options. However, even within this small pool, there were a few cards that quickly rose to the top.
Knowing that people with bad credit might have gotten that way because they have trouble making regular on-time payments, we eliminated cards that had a penalty APR. The Bank Americard® Secured Credit Card, the Citi® Secured MasterCard®, the Milestone® Gold MasterCard®, and the Indigo® Platinum MasterCard® will all bump up your APR to as high as 29.99% if you miss a payment, and that penalty APR will apply to future balances as well. Ouch.
What's APR? APR (or annual percentage rate) is the interest rate you pay for borrowing money. You can avoid paying this fee if you pay your balance in full each month.
The Total Visa® Unsecured Credit Card doesn’t have a penalty APR, but its everyday variable APR is a whopping 29.99%, so we eliminated that one too. The OpenSky® Secured Visa® Credit Card often shows up on “best secured card” lists, especially because its 18.39% APR is low compared to other secured card options, but it has a penalty APR of 22.50% and comes with a number of hidden fees, including the $10 same-day phone payment fee and a $3 “paper statement fee”. The primor® Secured Visa and MasterCard will actually tack on up to $49 if you receive a credit limit increase.
That left us with seven top options. Of these seven, the Discover it® Secured Credit Card – No Annual Fee*, the Capital One® Secured Credit Card, and the Credit One Bank® Unsecured Visa® for Rebuilding Credit are our favorites: First because of the benefits they offer, and second because all three cards give you tools to help you monitor your credit score as you work toward better credit.
Our Picks for the Best Credit Cards for Bad Credit
Just because you have a secured credit card doesn’t mean you can’t reap the benefits of a cash back rewards program. The Discover it® Secured Credit Card - No Annual Fee* helps you rebuild your credit and earn cash while doing it.
Here’s how it works. First, you need to make a deposit of $200 – $2,500 to earn a credit line of the same amount. If you put down a $500 deposit, for example, you’ll receive a $500 monthly credit limit.
Once your card is set up, you are eligible to earn 2% cash back on purchases at restaurants and gas stations, for up to $1,000 in purchases every quarter. You also earn 1% cash back on all other purchases, and Discover doubles your cash back at the end of your first year as a cardmember.
Here’s an example of how that could look over the course of your initial year:
$1,000 on restaurants and gas stations per quarter
$1,000 on other purchases per quarter
Multiplied by four quarters per year
Doubled at the end of your first year
While you’re earning your cashback rewards, you can also keep track of your FICO credit score. Discover provides your FICO score on every credit statement, and you can also view it at any time by logging on to your Discover account. The higher your score, the more credit options you’ll have later on — and you’ll probably find yourself wanting to check your credit score after making on-time payments or paying off your balance in full, just to watch that number grow.
After 12 months with your card, Discover will evaluate whether you’re ready to transition to an unsecured card. If that happens, your security deposit will be refunded, and you’ll be able to continue building your credit history with your Discover it® card — the same card you’ve been using, but no longer “secured” — and earning your cashback rewards.
The Discover it® Secured Credit Card – No Annual Fee* has an APR of 24.24%, which is a little higher than some of the other secured cards out there, but it makes up for it with its cashback rewards, no annual fee, and no penalty APR. The Discover it® Secured Credit Card – No Annual Fee* is also good if you need to transfer a balance from another credit card, because balance transfer funds get an intro APR of only 10.99% for the first six months.
The Capital One® Secured Credit Card takes a unique approach to secured cards. It’s our only top pick that doesn’t require you to make a security deposit equal to your line of credit: $200 for a $200 line of credit, $5,000 for a $5,000 line, and so on. Instead, cardholders make deposits of $49, $99, or $200, depending on their creditworthiness, and earn an initial credit line of $200. If you want a higher credit line, there are two ways to get it. First, you can make an additional security deposit before your account opens, and Capital One will match your deposit with a credit line of up to $3,000. Or, you can make your first five monthly payments on time and you’ll get an increased credit line with no additional deposit required.
Are you a student? If you’re in college, lenders expect you to be building your credit — and the Capital One® Journey Student Credit Card is designed to help you on your way. This is an unsecured credit card, which means you don’t need to put down a deposit, and it’s for students with average credit. The APR is 24.99%; you earn 1% cash back on all purchases (which bumps up to 1.25% if you make on-time payments); and you get access to a higher credit line if you make your first five monthly payments on time.
For people who want to build credit, but don’t have a lot of extra cash to put toward a deposit, this is a huge benefit: You get to use your credit without tying up a bunch of money in your credit card deposit.
Like Credit One and Discover, Capital One also gives you tools to help you monitor your credit score and watch it grow. The Capital One CreditWise app gets you access to your TransUnion credit score and includes a credit simulator so you can see how your credit score might change if you make different credit decisions (paying off debt, making on-time payments, and more).
There’s one big drawback: The Capital One® Secured Credit Card has the highest APR of all our recommended cards, at 24.99%. You’ll want to be sure to pay off those balances in full to avoid high interest charges.
The Capital One® Secured Credit Card also doesn’t graduate you to an unsecured credit card the way the other secured cards on our list do. You get your security deposit refunded when you close your account (assuming your balance is paid off in full), so you’ll have to do your own credit management to determine when your score is high enough to apply for an unsecured credit card. Let the CreditWise app be your guide.
There’s a lot to like about the Credit One Bank® Unsecured Visa® for Rebuilding Credit. It’s an unsecured card, so you won’t need to make a security deposit; the variable APR runs between 19.74% – 25.74% variable, depending on your credit score; and you have the ability to earn cash back on your purchases.
We also like Credit One’s pre-qualification system, which lets you know if you’ll qualify for the card without doing a hard pull on your credit score (too many hard pulls can lower your credit score — credit bureaus are wondering why you’re applying for so much credit at once). If you do get accepted for the card, we like that Credit One helps you track your credit score and gives you access to a summary of your credit report.
Here’s what we don’t like: Credit One’s terms are deliberately unclear, and that can affect everything from the interest you’ll pay on your balances to the amount of cash back you might receive.
In terms of interest: Most credit cards have what’s called a “grace period,” which represents the amount of time you have to pay off your balance in full without being charged interest. Credit One states, in its terms and conditions, that your card might not have a grace period; that is, that you might be charged interest from the first day you make your purchase.
|"If your Account has a Grace Period, your due date is at least 24 days after the close of each billing cycle and Interest will not be charged on any Purchases if your entire balance is paid by the Payment Due Date each month. For Accounts with no grace period, Interest is charged on Purchases from the posting date."|
You also might be charged an annual fee of up to $75. After your first year as a cardholder, that annual fee might be split into 12 monthly payments or it might continue to be assessed annually.
We also don’t like the fact that Credit One isn’t clear on its cashback rewards. Depending on your creditworthiness, you could earn 1% cash back on gas and grocery purchases (and no cash back on other purchases), or you could earn 1.1% cash back on restaurants and 1% cash back on all other purchases. When you receive your Credit One offer, you’ll be informed which cash back reward program you’ll receive — but it’s just one more piece of uncertainty surrounding this card.
Think carefully before going with Credit One. True, you don’t have to put down a deposit on a secured credit card, but you’ll want to be very quick on paying back your balances if you end up with one of those accounts that doesn’t have a grace period. Once you learn whether or not you qualify for this card, closely read the terms before accepting.
Other Credit Cards for Bad Credit to Consider
Three cards passed our criteria for “what makes a good credit card for bad credit,” but they don’t offer quite as much as our top picks in terms of features or benefits. Here’s a quick overview:
Deposit / Credit Limit
Possibility to Transition to Unsecured Card
$300 - $5,000
After 12 months
$200 - $3,000
$36 the first year, then $3 per month
$300 - $10,000
Each of these cards comes with its own unique perks. We really like the U.S. Bank Secured Visa® Card because it lets you earn interest on your security deposit. You probably won’t earn a lot of interest, especially if your deposit is small, but it’s a nice gesture.
The Merrick Bank Secured Visa® Card has the lowest APR of any of our featured cards, which is good if you anticipate carrying a balance on your credit card (which we don’t recommend, but we know it happens). As CreditCards.com reports, the average cardholder gets issued an APR of 16.15%, so you won’t be too far away from the average.
These three secured cards all match your line of credit to your deposit, but Wells Fargo Secured Visa® Credit Card stands out by letting you make an initial deposit of $10,000 — that’s quite a significant line of credit. This could be good for your credit score, since part of your credit score is determined by your “credit utilization ratio,” or the amount of credit you use compared to the amount of credit you have available. On the flip side, you need to have an extra $10,000 lying around to take advantage of that enormous credit line.
Finally, both the Wells Fargo Secured Visa® Credit Card and the U.S. Bank Secured Visa® Card will review your account and potentially graduate you to an unsecured card; U.S. Bank begins the review after 12 months, and Wells Fargo reviews your account “periodically.” Merrick Bank didn’t include any information in its terms about the possibility of graduating to an unsecured card, which means you might have to take the initiative and apply for an unsecured card on your own.
This secured card puts your deposit into an interest-bearing CD (or “certificate of deposit”) and includes perks like no foreign transaction fees when you travel outside the US. The card also boasts a variable APR of 11.15%-21.15% and balance transfer fees of 3%. USAA also adds military-related benefits such as a 4% APR on balances for up to 12 months during deployment or PCS.
5 Tips to Improve Your Credit Score
While you won’t see drastic changes overnight, it is possible to make smalls changes almost instantly. The three credit bureaus are constantly monitoring your credit use and moving your credit score up or down by a few points. If you want to build good credit as quickly as possible, here are a few tips.
- Don’t max out your credit card. Your credit score is determined in part by your credit utilization ratio, or the amount of credit you’re using compared to the amount of credit available to you. If your secured card has a $500 line of credit, keep your balances small (only $100-$200 for example) so your credit utilization ratio will be larger.
- Make your payments on time. Build your credit history with on-time payments. Even if you’re only making minimum payments, having a history of on-time payment will help you look like a responsible borrower.
- Pay balances off in full. Making minimum payments on time is good, but paying off balances in full is even better.
- Don’t cancel credit cards you’ve paid off. The longer you’ve had a line of credit available to you, the better your credit history looks, so don’t cancel those cards! You can put the cards away and not use them, but keep those credit lines open so they can add to your credit history.
- Start learning how credit works. Want to boost your credit score by 100 points? It’s time to start seriously studying credit. We reviewed the best credit report services and determined that MyFICO was the best option for people who wanted to track their credit and learn how to improve it as quickly as possible. MyFICO has a credit simulator to show you how your credit score might improve after five months of on-time payments, as well as educational resources and an online forum to help you become a credit expert.