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Credit Cards for Bad Credit - Compare & Apply

By Joe Taylor Jr.

Credit scores drop for a variety of reasons: unemployment, medical issues, or simply maxing out too many cards. However, favorable market conditions have created new credit card deals for consumers with low credit scores. Even if you're receiving pre-selected offers in the mail, it pays to review the information on this page to find out if you could be missing an even better opportunity to rebuild your credit.

Ins and outs of credit cards for bad credit

Subprime credit cards come in three varieties:
Unsecured. Some banks, like Capital One, offer "second chance" credit cards for consumers who can show that their bad credit resulted from temporary conditions. These cards may carry higher rates and fees than the industry average, but can quickly help rehabilitate credit.
Secured. If your credit score shows up in the bottom third of the scale, your best shot at a credit card may be a bank that allows you to leave a cash security deposit. Miss your payment, and the bank keeps your deposit.
Partially secured. Make regular monthly payments on your secured credit card, and a bank may consider boosting your credit limit without requiring an additional deposit.

In general, the higher your credit score, the less you'll have to leave on deposit with an issuing bank. However, the more you can afford to leave on deposit, the less you'll pay in service fees and finance charges.

Features of subprime credit cards

If you're clear about using a new account to rebuild your credit, you won't need to worry about predatory lenders. Use these five indicators to help decide whether a subprime credit card offer makes sense:

  • Annual fee. Secured credit cards from reputable banks offer reasonable annual fees, similar to those of unsecured credit cards. By law, a bank can't set a fee higher than 25 percent of your credit limit.
  • Interest rate. Although you won't see many low interest balance transfer deals for credit scores below 650, a secured or partially secured credit card will usually charge around 20 percent interest.
  • Security deposit. Reputable lenders won't ask you for more cash up front than you'll receive as a credit line.
  • Credit reporting. Only pursue a bad credit credit card if it reports your payment status to all three of the major credit reporting bureaus.
  • Graduation potential. The very best credit cards for rebuilding credit offer clear paths to earning more unsecured credit, either by boosting your limit or qualifying you for an additional account.

Some prepaid debit cards market themselves as Visa or MasterCard accounts for consumers with bad credit. Prepaid debit cards may offer convenience that rivals that of a traditional checking account. However, they don't report your activity to credit bureaus, so they won't help you improve your credit score.

What to watch out for when comparing credit cards for poor credit

When reviewing credit card offers, watch for three potential deal breakers:
Fee harvesting. Despite rules that prohibit banks from exhausting more than 25 percent of your credit limit with fees, some subprime issuers still attempt to capture revenue by asking prospective cardholders to forward application fees and other service charges before opening an account.
Poor brand reputation. Check around to learn more about any bank that solicits you directly for a new credit card, especially after you've endured a bankruptcy or another kind of court judgement.
Unfamiliar payment networks. Some shady operators try to market credit cards that won't work outside their closed sales networks. Look for the real Visa or MasterCard logo to be sure a credit card will work at traditional retailers.

One final note: remember that opening any new line of credit will cause a temporary drop in your credit score. Therefore, you'll want to choose an account that you'll feel comfortable keeping open during the few years it will take to rebuild your credit. Compare the offers on this page to learn whether there's a credit card that's right for your current situation.

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