Navigating the world of credit and credit cards can be incredibly frustrating sometimes. Having and using a credit card is the quickest and easiest way in which to build or rebuild your credit score. But if you have bad credit, or simply little or no credit history at all, it can seem nearly impossible to qualify for one. While this paradox may seem like a trap with no escape, don’t despair just yet! Read on for the best credit cards for bad credit.
Secured Credit Cards
Secured credit cards function exactly the same as a normal credit card, except that you need to provide a security deposit matching the size of your card limit. The credit card company holds on to the deposit and will use it to cover the balance if you default on a monthly payment.
A secured credit card is by no means ideal. You essentially lose access to a significant amount of your money that you won’t be able to use for anything else. What’s more, there are usually fees that will have to be paid in addition to the deposit; and secured credit cards almost always charge higher interest rates than unsecured credit cards.
Still, if you have a poor credit history and can’t qualify for an unsecured credit card, a secured credit card might be among the best credit cards available to you until you are able to rebuild your credit score. Just be sure to pay off your balance in full each month. Once you’ve gotten your score high enough to qualify for an unsecured card, you can cancel your account and get back your deposit.
Unsecured Credit Cards
An unsecured credit card is the type of credit card that most of us are used to. There is no security deposit required, which makes it an instant improvement over a secured credit card. Still, if you have a bad credit score or no credit history, your options may be limited to unsecured cards specific to those with bad credit. These often come with significant annual fees and severe penalties for going over the credit limit.
While an improvement over a secured credit card, an unsecured card for bad credit still has its caveats. If you have no credit history, bad credit, or are recently bankrupt, however, it may be the only option available to you.
Low/No-Annual Fee Credit Cards
Rating a good card can be subjective, but generally the best credit cards for low credit are those which offer low interest and low or no annual fees. Unfortunately, for those individuals with worse than fair to good credit, a card with no or low fees can be difficult to obtain. Still, it’s always worth applying.
CAUTION: Be sure not to apply for every credit card you can find. Doing so can lower your credit score even further.
Low-Interest Credit Cards
The same goes for low-interest credit cards as for those with low annual fees. Naturally, a low-interest credit card is better than a high-interest one. But, especially for secured credit cards, and for individuals with bad credit, a low-interest option can be difficult to find.
Options are available in the fair to good credit range, however; and again, it can still be worth applying for these if you have bad credit – but be prepared to pay higher rates until you are able to bring up your credit score.
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