MAKE MONEY ONLINE POSTS: Best Credit Cards for Bad Credit

الأربعاء، 5 ديسمبر 2018

Best Credit Cards for Bad Credit

Creditors hear a lot of interesting stories from applicants with low credit scores:

You lost your job and couldn’t pay the student loan for a few months. You thought you’d gotten a deferment but were too busy job hunting to find out for sure.

Then your roommate moved out without paying the bills that were in your name.

And most of the time, creditors don’t care.

Your credit score — that little 3-digit number — has already answered the only question they ever wondered about your life.

Even the most convincing explanations won’t slow the denial message, which is frustrating for applicants with bad credit.

Credit cards can help rebuild your credit, offer advantages like cash back, make booking hotel rooms easier, or bail you out if your refrigerator goes out or your muffler falls off.

How Bad Credit Affects Credit Card Approval

Wouldn’t it be great if credit card companies understood and made special exceptions to help people out?

As most of us already know, that’s not typically how credit works. Credit cards are backed by banks, and banks have rules for a reason.

Statistically speaking, someone with a low credit score is more likely to default on a credit card.

Since banks usually make unsecured loans when they issue most credit cards, they have little recourse if you don’t pay.

They can’t repossess what you bought the way a car dealership could. All they can do is hurt your already hurting credit score.

You can find a few exceptions, though. If you look around enough, you’ll find some credit cards specially designed for applicants with bad credit.

The Downside of Credit Cards with Bad Credit

There’s no magic bullet, though. While your odds of getting approved for one of the cards below may be high, expect some trade-offs:

Higher fees: Someone with good credit can shop around for cards with no or low annual fees. Not so if you have bad credit. Expect to pay some of the highest fees out there.
Higher interest rates: You’ll see ads about low or no interest for a set number of months with some credit cards. Cards for people with lower credit scores tend to charge the highest interest rates.
No perks: Looking for features like cashback on purchases or points toward plane or movie tickets? You’ll need to wait until your credit score climbs back into “good” or “great” territory. Even if you can find a card for applicants with bad credit that offers cashback, your rewards won’t make up for the high fees.
No balance transfers: If you’re looking for relief from other out-of-control credit card balances, look elsewhere because these cards don’t allow balance transfers.
Low credit limits: These cards tend to start out in the $300 to $500 range with the possibility of increasing to $2,000 after a year of keeping the account in good standing.
Paying a security deposit: Some of these cards may surprise you by asking for a security deposit. This isn’t necessarily a bad thing. By paying a deposit you may be able to reduce some of the high fees and interest rates since your creditor will be taking less of a risk.
Having a checking account: Most new credit card accounts now require cardholders to pay bills online, which means you’ll need a checking account. Cards don’t usually allow you to pay a balance using another credit card.

Best Cards for Bad Credit

Looks pretty grim, doesn’t it? You may be wondering whether you should even consider getting a card like this.

I can think of one really good reason to go this route: To speed up your credit rebuilding process.

If you’re serious about rebooting your credit score so you can flex your borrowing muscles in the coming years (think new house or car), these cards can help:

1. Total Visa

First, the good news: You can qualify for a Total Visa credit card with a credit score as low as 300, and you’ll get an instant decision on whether you qualify.

Now for the not-so-good news: You’ll have to spend some money up front to get this card, and you’ll have to pay an annual fee to keep it.

Fees include:

Application fee: Processing your application will cost $89. So don’t apply unless you know for sure you want the card and have a credit score of 300 or higher.
Initial annual fee: A $75 annual fee that kicks in when you open the account.
Ongoing annual fees: The annual fee goes down to $48 the second year, but a $6.25 monthly fee also begins.
Late fees: Like most cards, you’ll be hit with a fee if you don’t pay your minimum balance on time. The fee for Total Visa will not exceed $38.

These fees may seem steep because, well, they are.

But when you have bad credit, you have fewer options from creditors. You’ll have to decide whether having the card will be worth the money.

Another disadvantage to a Total Visa Credit Card is its low credit limit. Normally the card starts with a $300 limit, minus the $75 annual fee, which means you’ll initially have only $225 in spending power.

Is that enough to make getting the card worthwhile? Not necessarily, if you’re getting credit to have in case of an emergency or to do a little more Christmas shopping than you can afford.

It could be worth it, however, if you’re working to rebuild your credit.

Improving your credit score includes making payments on time and having open credit accounts. This card can help give you the opportunity to make regular payments.

Someone working to improve a credit score should pay off the card’s entire balance every month. This approach will also help you avoid Total Visa’s high annual percentage rate of 29.99 percent.

At that rate, a card’s balance can get out of control pretty quickly if you don’t stay ahead of it.

2. FIT Mastercard

Looking for a little more spending power than the Total Visa?

Mastercard’s FIT program offers a $500 initial credit limit. Depending on whether you make regular payments for a year, you can get a credit limit increase to $2,000 after the first year.

Other than the higher spending limit, FIT Mastercard behaves a lot like Total Visa. You should have at least a 325 credit score to apply.

Unlike Total Visa, you won’t need to pay an application processing fee just to apply, but expect higher annual, then monthly, fees:

Processing fee: If approved, you’ll be charged an $89 processing fee for your application.
Annual fee: Fit Mastercard’s $125 annual fee for the first year is higher than Total Visa’s $75 annual charge. The fee goes down to $96 the second year.
Monthly fees: After the first year, you’ll pay $10 a month, $3.75 more than Total Visa’s monthly fee.
Late fees: Miss a payment? Expect up to $38, and remember you’ll pay interest even on fees. Fit Mastercard charges 29.99 percent.

Just like with Total Visa, you as the consumer should decide whether opening a Mastercard Fit account helps you. It can offer more spending power than Total Visa, but once again you’re starting in the hole because of the card’s high fees.

This card works best for someone trying to rebuild credit. Having an open account in good standing looks good to credit agencies.

Again, just be sure to keep the card’s balance paid off. At nearly 30 percent interest, the Fit Mastercard can get out of control if you let it.

If that happens, your credit score will probably get even worse.

3. Reflex Mastercard

The Reflex Mastercard, another credit card for applicants with bad credit, works almost exactly like the Fit Mastercard. It’s likely you’ll get approved for the card, either with an unsecured or a secured account requiring a deposit.

Your spending limit will start out at $500, and a chunk of that amount will go to your initial fees:

Annual fee: Like Mastercard Fix, expect a $125 annual fee for the first year and a reduction to $96 at the beginning of year two.
Monthly fees: Also like Fit, Reflex Mastercard charges $10 a month after the first year, which equals $120 a year.
Late fees: The same $38 late fee applies, as does the high annual interest rate of 29.99 percent.

As with other credit cards for people with bad credit, the question becomes not whether you can get approved but whether you should. After getting approved you’ll face a three-digit balance to cover the annual fee, leaving $375 as an available balance.

So you wouldn’t be getting much of an emergency fund with a card like this. You would, of course, be getting a way to improve your credit score.

The Reflex Mastercard, like the Fit and the Total Visa, reports to the three credit agencies each month.

Getting the card, managing to pay off the fees and keep the balance paid down, would be a first step to rebuilding your credit score.

After a year, your credit limit could increase as high as $2,000. With the card’s high fees, though, you may want to consider another card at that point if your credit has increased enough.

4. First Access Visa

Applicants with bad credit, even scores in the low 300s, can often get approved for a First Access Visa. This card works a lot like the Total Visa card we’ve already discussed.

You’ll pay an $89 application processing fee just to apply. If approved, you’ll also pay:

First annual fee: The card charges its initial $75 annual fee as soon as the account opens.
Ongoing annual fees: The $75 annual fee goes down to $48 beginning in year two, but you’ll also pay a $6.25 fee each month beginning in the second year.
Late fees: First Access Visa will charge up to $38 if you’re late making a payment.

Like Total Visa, expect a low initial opening limit of $300, $75 of which will be tied up in the initial annual fee.

No, it’s not a lot of spending power, but it can be a step toward a more stable credit score if you pay the balance down each month and avoid the 29.99 percent interest.

This card has been known to allow credit limit increases after six months of keeping the account in good standing.

First Access Visa reports to the three major credit bureaus each month, so you’ll get quicker results improving your credit score as long as you keep the card up to date.

5. Surge Mastercard

This card also fits the same mold: It’s accessible to people who are rebuilding their credit scores, but it costs money to open the account and to keep it open:

Annual fee: Surge Mastercard charges a $125 annual fee which lowers to $96 the second and subsequent years.
Monthly fees: Expect an additional maintenance fee of $10 a month ($120 a year) beginning the second year.
Late fees: The card charges up to $38 for late payments and 29.9 percent interest, like most cards for people who are rebuilding their credit.

You can get up to $500 spending power when you open the account, but remember $125 will be already spent on the annual fee.

The main reason to apply for a Surge Mastercard, like any of the other cards we’ve reviewed in this post, is credit rebuilding.

Rebuilding your credit score can lead to a lot more opportunities for building a more stable financial future. Let’s get into that next.

Tips to Improve Your Credit Score

Benefits of Improving Your Credit Score

People with bad credit often consider their personal finances a lost cause. You may wonder if it’s worth it to bother improving your credit score.

Having a solid credit history has some obvious advantages:

Higher credit limits: The better your score the more you can borrow.
Lower interest rates: Higher credit scores mean creditors will take less of a risk lending you money, so your interest rates can be lower.
Lower payments: Borrowing at better terms means you can usually get lower payments on a home loan or a car loan.
Ability to shop for loans: When you’re an ideal candidate for a loan you can shop around to get the best deals on a credit card or secured loan.
Ability to help others: If your kid wants to buy a car and has no credit history, wouldn’t it be nice if you could help by co-signing? If you have bad credit you won’t be much help there.

On top of those reasons, most insurance companies now consider your credit score when you apply for coverage: life, auto, and home insurance rates tend to be lower for people with higher credit scores.

Why? Because research has shown people with high credit scores tend to file fewer insurance claims.

Your credit score can also impact your ability to open a bank account or rent a new apartment.

When you sign up for public utilities such as electricity or water, people with lower credit scores often need to pay higher security deposits.

How to Improve Your Credit: Slow and Steady

When you have bad credit you have two options:

Wait a decade or so until the bad marks age off your score: Depending on when your creditors give up and write off your debt, you may only have to wait eight years or so. At that point, you’ll have limited credit.
Take action to add some good to the bad: You can recover sooner by giving the credit bureaus something good to digest, like making regular payments or having some available credit.

If you decide to take action, the credit cards on this page can help. They’ll give you an opportunity to show the credit bureaus that you’ve changed your ways.

It’s not all about having a credit card, though. Credit bureaus consider several factors when they calculate your score:

On-time payments: Paying all your bills on time, including credit cards, makes up a sizeable chunk or your credit score.
Outstanding debt: How much you owe matters, which is why paying off your credit cards each month or as often as possible helps your score.
Available credit: If you have a $2,000 credit limit on a card but you’re using only $50, the credit bureaus take note — another reason to pay off those balances.
New credit inquiries: Usually, applying for credit can lower your score a bit, so don’t apply for every card on this list.
Balance of account types: Having a variety of open accounts impresses the credit bureau algorithm gods. So mixing in a credit card can help. If you already have four or five credit cards, back off a little.

Yes, it’s a lot to think about, but now you can get an app to do a lot of the thinking for you. Look into an app like Credit Karma, one of my favorite tools, to help you improve your credit score.

These apps keep your credit score at your fingertips and they analyze your score to make recommendations for ways you can improve it.

An added benefit to keeping an eye on your score with an app: If your score changes drastically, you’ll know it right away.

A fast-changing score could mean a lot has changed in your life, but it could also mean someone else is using your identity.

The sooner you know, the sooner you can report the fraud and limit its damage.

Should You Use a Credit Card to Rebuild?

Banks issuing credit cards to people with bad credit may seem like they’re doing you a favor. Closer inspection shows you’re paying enough in fees and deposits to remove much of the bank’s risk.

How you view these credit cards makes a huge difference:

If you’re looking for spending power, these cards won’t help much, and I’d stay away from them.
If you’d like to reboot your credit history, they can help and be worth your while.

Credit cards for people with bad credit won’t solve all your credit problems. In fact, they can make things worse if you don’t keep the account current.

But if you’re determined to improve your score, they can speed things along. Yes, the fees and terms are unattractive. But if they lead to a more stable financial future, they may be worth it.

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