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If you have poor credit you may have given up on getting a credit card. That’s a mistake. Credit cards can hurt you if you use them carelessly, but if you use them wisely they are a great way to build new credit or improve poor credit. Credit cards for poor credit may not be easy to find, but they are out there.

If you have poor credit, your best bet is a secured credit card. If you don’t know what that is or why it’s a great option for people with poor credit, keep reading.

About Secured Cards

Secured credit cards are designed for people with credit problems. People with poor credit can’t get traditional cards because the issuers don’t want to take the risk of lending to them. Secured cards take away much of that risk.

When you get a secured card you will make a deposit with the credit card issuer. That deposit becomes your credit limit. If you deposit $200, your credit limit is $200. That reduces the issuer’s risk, so they are more willing to take a chance on you.

Once you make your deposit, a secured card is no different from a conventional card. It’s not labelled “secured” and nobody will know that it’s a secured card. Pay your bill in full and on time every month and you will pay no interest. If you carry a balance over past the due date, you will pay interest.

If you make your payments on time many issuers will lift your credit limit higher than your deposit. That will push your credit utilization lower, as long as you don’t add more spending. You may even be able to upgrade to an unsecured card!

How to Build Credit with a Secured Card

If you have very poor credit you will want to improve it. A secured credit card can help you do that. Your card issuer will report to the credit bureaus.

Two things to remember:

  • Payment history is the single greatest factor in calculating your credit score. On-time payments will build credit. Late payments will hurt credit.
  • Credit utilization makes up roughly 30% of your credit score. Credit utilization is the percentage of your credit limit that you use. You want to keep your balance under 30% of your credit limit, or lower if you can.

These steps can help.

Here’s what to do:

  • Keep your card active. An active card helps your credit more than a dormant one.
  • Pay your bills on time. The fastest way to build credit is to pay every bill on time.
  • Pay your bill in full. If you pay the whole bill on the due date you pay no interest. That’s a free laon from the card company! Carry a balance, and you pay interest.
  • Keep your balance low. The credit limit on a secured card is usually low. If your balance goes too high your credit utilization goes up and you harm your credit.

Here’s a great way to use a secured card to boost your credit. Look for a monthly bill that you’re already paying, like your internet or Netflix bill. The bill should be for less than 30% of your card’s credit limit.

Put that bill on your card and set up an automatic payment from your checking account. Then put the card away and don’t use it for anything else. The bill will be paid, your card will be active, and you won’t pay interest. It’s best to do this with a card that has no annual fee to keep your cost down. You can do the same thing with a second secured card.

The Best Credit Cards for Poor Credit

Here are some things to consider when shopping for a secured credit card.

  • Is there an annual fee?
  • How high is the interest Look for the APR (Annual Percentage Rate).
  • What is the lowest deposit you can make?
  • Will the issuer upgrade you to an unsecured card if your payment record is good?
  • Does the card have rewards?
  • What are the requirements? Is there a minimum credit score?

Here are some of the best credit cards for very poor credit.

Best for Rewards: Discover it Secured Card

If you want a no-fee secured card with rewards, the Discover it Secured Card will be a top choice. The minimum deposit is $200. There’s a variable 22.99% APR and no annual fee. Upgrades are permitted. You’ll need a credit score of 350 or above.

What sets this card apart are the rewards. There’s a 2% cashback reward on spending up to $1000 every quarter quarter at gas stations and restaurants. The reward is 1% on all other purchases. That’s a great deal, but don’t let the rewards tempt you into unnecessary purchases!

Best No-Fee Card with Low Interest: nRewards Secured Credit Card

The nRewards Secured Credit Card is issued by the Navy Federal Credit Union. It does not have an annual fee. The regular APR is 18% (variable), which is quite low for a card without an annual fee. You will need to join the credit union and have a credit score over 350. You’ll earn one reward point for every dollar you spend.

Best if You Have No Credit Score: OpenSky Secured Visa Card

The OpenSky Secured Visa Card doesn’t require a credit check, and you don’t even need a bank account! If you have a limited financial history, this one is a great option. You will pay for the convenience: There’s an annual fee of $35 and the APR is a variable 17.39%. The card does not offer rewards.

Lowest APR: First Progress Platinum Prestige Mastercard Secured Credit Card:

The First Progress Platinum Prestige Mastercard Secured Credit Card does not have a minimum credit score, and requires only a soft pull on your credit record. That has no impact on your credit score. The APR on purchases is a variable 9.99%, one of the lowest anywhere. The tradeoff is a $49 annual fee. Unless you carry large balances (which you shouldn’t) you won’t save enough on interest to justify the fee. There are no rewards and the minimum deposit is $200.

Unsecured Store Card Option: Fingerhut

Many stores offer credit cards. Most of them have credit score requirements. Fingerhut maintains an online store with a credit card designed for people with bad credit. It’s easy to apply and the site will give you a fast decision, usually in seconds. There’s no deposit or credit score requirement, just an income requirement. You’ll need a Social Security Numnber. Fingerhut reports to the three major credit bureaus. There’s a fixed APR of 29.99%.

There is a downside, of course: the items in the Fingerhut online store are often priced well above the same items in competing stores. If you need a credit account to build your score and you only buy small items that you really need it could help, but we wouldn’t recommend it for regular shopping.

What’s In the Cards

The specs on these cards make one thing clear: cards with no annual fee or with rewards usually have higher APRs. That’s expected: the issuers want to make money. But does that mean you should swallow the fee just to get a lower APR or some reward points? Think twice before making that decision.

  • You don’t have to pay interest at all. Pay every bill in full and on time and you’ll never pay a dime in interest.
  • Secured cards usually have relatively low credit limits. You can’t spend enough to run up a large interest-bearing balances (which you shouldn’t do anyway) or earn enough rewards to balance out the fee.

In most you will be better off with a card that has no annual fee. If you get your credit up high enough to qualify for a conventional card you might think about rewards, but for most people with poor credit a no-fee card is the best choice. Only consider a card with a fee if it’s all you can get.

A low minimum credit score will not assure approval. You can still be turned down. If you have significant black marks on your record consider starting with a card that does not require a credit check.

What comes next?

It is possible to get credit cards for poor credit, but that doesn’t mean you want to leave your credit score down in the dumps. Your secured card can help you improve it! If you pay every bill on time and keep your balance below 30% of your credit limit, you’re on the right track.

If you’re managing your secured card well, consider upgrading or taking on another secured credit card. Many banks and credit unions offer credit-builder loans, or you can apply with an online lender like Self. These loans are designed for people with poor credit. They put an installment loan on your record, which improves your credit mix, and if you make your payments on time you’ll be boosting your score.

Know Your Credit, Raise Your Credit

Improving your credit gets easier when you understand the system. You need to know how your credit score is calculated. Get your credit reports for more insight into your finances, and learn how to understand them. Keep an eye out for credit report errors or anything that might indicate identity theft, and dispute any problems. You don’t need to pay anyone to help you: you can do it yourself. Watch out for people who say they can fix your credit, give you a new credit identity, or remove legitimate items from your credit report. Those are signs of debt relief and credit repair scams.

Rebuilding damaged credit takes time. It’s still possible, and it’s a key step toward taking control of your financial life.