A credit card for bad credit can help improve your score if you use it responsibly and pay off the balance in full every month. But be careful with fees, especially those for balance transfers and cash advances.
Look for a low annual fee, no monthly fees and a path to upgrade once your score improves. Also consider whether a card reports to the three major credit bureaus.
They charge high annual fees
A credit card can be a great way to improve your credit, but some cards can charge high fees that make them unnecessarily expensive. It’s important to check the annual fees of any credit cards you’re considering, as well as their APRs and minimum and maximum security deposits.
Most credit cards for bad credit are secured, requiring you to place a refundable deposit that serves as your credit limit. This reduces the card issuer’s risk and makes them more likely to approve you. But these types of cards usually have more expensive interest rates and few perks, and many don’t offer a path to graduate or upgrade once your credit score improves.
You should always try to pay your credit card balance in full each month, and avoid accumulating more than 30% of your total credit limit. Also, you should always make sure your card reports to the credit bureaus, which can help boost your score.
They charge high interest rates
Many cards that target bad credit offer low credit limits and have high interest rates. These cards may also charge steep fees, such as annual or maintenance charges that can add up to more than $100 a year. These cards can be difficult to manage and can quickly lead to debt. High interest rates can also make it harder to save for the future, as more of your money goes toward servicing your debt than putting it into assets or equity.
To find the best card for you, consider factors such as fees, deposit requirements (if applicable), interest rates and whether your credit card issuer reports to all three credit bureaus. You should also look for a path to upgrade to an unsecured card when your credit has improved, and consider cards that offer rewards programs. Also, be sure to pay your bills on time and not go over your credit limit to help improve your credit score.
They have unclear terms and conditions
Some credit cards that cater to people with bad credit are riddled with unclear terms and conditions. This can be frustrating, even for credit card experts. This can lead to consumers paying more than they should, especially if they only make the minimum payment. Some cards that cater to people with bad credit also charge high fees and interest rates. This is why it’s important to research the credit cards you’re considering carefully before applying. To learn more about choosing the best credit card for you, check out NerdWallet’s guide to the best credit cards for bad credit. Shannon Terrell is a contributor for NerdWallet and a personal finance expert.
They have hidden fees
Credit cards marketed to people with bad credit have hidden fees that can hurt consumers. These include high annual fees, account opening fees, and even fees for increasing the credit limit. However, NerdWallet has a list of the best credit cards for bad credit with low fees that can help consumers build or repair their credit. These cards also report to the credit bureaus and offer a path for upgrading to an unsecured card.
Many credit card companies only extend lines of credit to consumers with good or excellent scores. Therefore, the card options for people with bad credit are limited. The most popular option is a secured card that requires a security deposit to open the account. Other alternatives are unsecured credit cards that require a higher credit score.
It’s important to find a card with low interest rates and no annual fees. A good way to do this is to check your Experian credit score. This free tool updates every 30 days and includes a history of all your credit applications.
