Posts Carousel

What Are the Best Credit Cards to Rebuild Bad Credit?

What Are the Best Credit Cards to Rebuild Bad Credit?

When you’re looking for the best credit cards for bad credit to rebuild your borrowing power you do have a few choices: A secured credit card, an unsecured credit card, and prepaid credit cards.

Each of these credit cards for bad credit can help rebuild your credit score and have different benefits as well as drawbacks.

Rebuilding your credit can take time – there’s no quick fix. So choosing the best credit card for bad credit will be even more important because you may need that particular credit card for a while.

Also, remember that the primary purpose is to rebuild your credit, and not just having another credit card for spending. This is an opportunity to make a fresh start.

What to Keep in Mind When it Comes to Secured Credit Cards:

Usually, the best credit cards for bad credit to rebuild your creditworthiness are secured credit cards. A secured credit card requires the borrower put down collateral, or a cash deposit, that then becomes their line of credit.

So, if your credit card company requires a cash deposit of $1000, that’s the maximum amount that you can charge. The maximum amount a bank or credit card company allows will vary. Many companies require a $500 deposit, but you’ll see we found other examples.

Whether your credit limit is $500 or $2000, it’s still crucial that you pay your credit card for bad credit on time to successfully rebuild your credit history.Best Credit Cards for Bad Credit to Rebuild

Another feature you’ll find with secured credit cards is that they often come with much higher interest rates. When your credit history shows late payments and loan defaults, you become a bigger risk to lenders. Consider the higher interest rate a trade-off for the chance to improve your borrowing options in the future.

Secured credit cards also report your payment history to the major credit bureaus. As you demonstrate a responsible performance of managing debt, your credit score will improve.

We did a bit of research and the following options represent some of the best credit cards for bad credit to rebuild your FICO score that we could find.

Wells Fargo Secured Visa Card Credit Card

Like many secured credit cards, the Wells Fargo Secured Visa Card has a high-interest rate: An ongoing APR of approximately 18 percent.

However, it also has a maximum credit line of $10,000. This generous credit limit is what makes it one of the best credit cards for bad credit to rebuild your financial reputation. You’ll need to make a collateral deposit, regardless of what your preferred credit limit is. If you wanted to obtain the maximum credit line, this would be a good card to get if you were selling your home to downsize. For a lower amount, but still substantial, you might consider using the money from your tax refund.

Other pros and cons include:

  • Annual fee is $25 (quite low compared to other cards)
  • Potential to be upgraded to an unsecured card
  • Doesn’t have any rewards perks
  • Doesn’t offer free credit scores

The higher credit line (you’ll see comparisons) will also work to keep your credit utilization low. That means that you have more credit than you’re using. This higher credit limit also gives you access to money for an emergency (and not an emergency trip to the mall).

US Bank Secured Visa Credit Card

One of the results of having poor credit is the high-interest rates you’ll face until you begin to improve your debt performance and credit score. The US Bank Secured Credit Card is no different: Interest rates range from 13 – 24 percent.

However, the US Bank Secured Visa Card also comes with a higher than usual credit limit of $5000 (maximum). While you may not have $5k to invest in improving your credit, even a few thousand dollars gives you an emergency fund as well as helping your credit utilization ratio.

Here are a few additional pros and cons of this card:

  • Annual fee is $29
  • Automatic evaluation after 12 months
  • Potential to be upgraded to an unsecured card
  • No longer offers free FICO scores

Despite the high-interest rate, the other advantages make this a very good option for a credit card to rebuild your bad credit. And part of the rebuilding process involves not charging merchandise you don’t really need, so your credit card bill should be low.

Capital One Secured MasterCard Credit Card

With a high-interest rate (24 percent) and no rewards program, the Capital One Secured Master Card still has some impressive features. You can opt for a credit limit of $3000 and even pay your collateral cash deposit over time.

More pros of the Capital One Secured Master Card include:

  • There is no annual fee
  • Reports to the major credit agencies
  • Has access to Credit Tracker
  • A higher credit line possible without extra deposit

If you don’t have a lot of extra money for your collateral deposit, you have up to 80 days to fund your card for the credit line you can afford.

Digital Federal Credit Union Visa Platinum Secured Credit Card

Begin the journey to improve your credit standing with a credit card for bad credit that also allows you to build a relationship with a new financial organization Digital Federal Credit Union (DCU).

The Digital Federal Credit Union Visa Platinum Secured Credit Card has no annual fee and joining DCU has a one-time donation of $10 to an eligible charity.

The annual percentage rate (APR) for this card is quite low – 11.5 percent. There is no rewards program

Other features of the DCU Visa Platinum Secured Credit Card include:

  • DCU membership requirements are lenient
  • DCU serves all 50 states
  • DCU offers other banking and lending services
  • The credit card is compatible with Apple Pay

If you’re interested in more than just a bank credit card, the DCU Visa Platinum Secured Card is a wise choice.

What Is an Unsecured Credit Card?

An unsecured credit card is the most common type of credit card: You apply to the bank or credit card company and once you’re approved you agree to the terms and credit limit you’re offered. There is no cash deposit required and the interest rates are low: sometimes as low as 8 percent. Many unsecured credit cards have very high borrowing limits – sometimes as much as $15,000.Best Credit Cards for Bad Credit to Rebuild

Unsecured credit cards also report your payment history to credit agencies. So as you show you can properly manage debt, your credit score remains intact.

However, getting an unsecured credit card for bad credit to rebuild your relationship with lenders will have different terms:

  • Lower credit limits
  • Higher interest artes
  • May charge an application fee
  • May charge a processing fee

Having a poor credit performance can limit your opportunities for credit of any kind. Some credit card companies prey on people with bad credit histories because of these limited options.

While you may benefit from not having to provide a cash deposit for your credit limit, you should still look closely at the terms and conditions of the credit card you’re considering.

The annual fees may be higher and in some cases increase over time, regardless of your payment history.

Begin by researching reputable banks and well-known credit card companies first.

Also make sure the company reports to the three major credit bureaus – Equifax, Experian, and Trans Union – so when you demonstrate a solid payment history your credit score will reflect that.

Here are two options for unsecured credit cards for bad credit to rebuild the way you handle debt:

#1 Credit One Bank Credit Card with Gas Rewards

The Credit One Bank Credit Card with Gas Rewards is unique in that as an unsecured credit card for bad credit it has some very strong benefits.

This application for this card is structured as a pre-approval. That way if a borrower is denied the request doesn’t appear on their credit report as a “hard inquiry.” Too many “hard inquiries” (e.g. applying for and being denied credit) can hurt your credit score.

This is key since the process you’re undertaking is to rebuild your credit.

Another reason the Credit One Bank Credit Card is unique is the gas rewards offered. Cardholders earn unlimited 1 percent cash back on gas purchases. Most secured credit cards have no rewards program built into their programs. The rewards are reflected in your statement each month – there is no timetable to earn a certain amount to receive credit.

The Credit One Bank card is a very good credit card for bad credit to rebuild your credit performance because you also receive emails and text alerts to remind you of your upcoming payment.

Other pros and cons of the Credit One Bank Credit Card with Gas Rewards include:

  • Credit limit of $500 or lower
  • Free online credit score tracking every month
  • An annual fee of $39 – $99
  • Interest rate is 23.9 percent

This card also offers the potential for credit line increases. So, it’s possible that after making the first six payments on time, your limit will be raised.

It’s also advised that whenever the credit card interest rate is high (18 percent and higher) to use the card sparingly so you’re more likely to be able to pay the monthly balance in full.

#2 The Milestone Gold MasterCard

The Milestone Gold MasterCard also utilizes a pre-approval process. Again, the result will appear on your credit report as a soft pull or soft inquiry. The pre-approval then comes with the terms of the cards that you can apply for. Then you choose what is best for your situation.

Unlike the Credit One card that is clearly associated with Credit One Bank, the Milestone Gold MasterCard is a credit product issued through Mid America Bank and Trust.

Here are a few features of this card:

  • An APR of 23.9 percent
  • Borrower chooses from three different cards
  • The annual fees vary depending on the card

The Milestone Gold MasterCard makes for a reliable option for a credit card for bad credit to rebuild your credit standing because of the variety.

By supplying three options for applicants that have bad credit, there is the opportunity to look for the credit card that will fit your current needs. This also prepares you to meet your future goals to reestablish a good credit history.

Many unsecured credit cards for bad credit to help you rebuild your FICO score come with terms and fees that could make your financial situation worse. One card we researched charged 36 percent on purchases and cash advances. The credit limit was low ($300) and the card required a $95 security deposit.

Since neither the Milestone or Credit One cards report hard inquiries to the credit bureaus, you might be better off applying for either (or both) cards first, if you cannot afford the cash deposit for a secured credit card.

Just remember that even with the secured credit cards with higher lines of credit, you can choose the amount of money you’ll fund.

Some Concerns About Prepaid Cards

One reason prepaid credit cards are popular is because anyone can get one. There’s no credit check, and unlike unsecured or secured credit cards for bad credit to rebuild your debt management, there is no actual line of credit.

Because companies that provide prepaid credit cards don’t require your credit history or report to credit agencies, they’re not useful if your goal is to restore or improve your credit rating.

Many secured and unsecured credit cards require an annual fee. However, some prepaid credit cards can charge fee for your initial application, as well as charges on transaction fees, balance inquiries, and monthly maintenance fees.

Choosing the best credit card for bad credit to rebuild your future will depend on your individual situation. The credit cards here represent a few choices for you to consider.

You may want to do some additional research and look more closely at the features of these cards – or others you find – so you really do wind up with the best credit card for bad credit to rebuild your creditworthiness.

Scott Carver
Scott Carver
ADMINISTRATOR
PROFILE