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You probably know this already, but it’s not easy to find a credit card for very poor credit. You’re at the very bottom of the credit ladder. That makes you a high risk, and conventional card issuers won’t want to deal with you. That’s a problem. Credit cards are a great way to build credit, but you can’t use them to build credit unless you can get one!

There is a way for even people with very poor credit to get a credit card and start building credit. Secured credit cards are here to help.

How Secured Cards Work

A secured credit card is secured by a deposit. You put down a deposit, and the deposit becomes your credit limit. You can’t charge more than you have on deposit. That means the issuer takes no risk. That’s why issuers will approve secured cards for people with very poor credit.

Once you have the card, it works just like any other card. You can make charges up to the credit limit. It doesn’t say “secured” on it and nobody will know it’s a secured card. You’ll get a statement and bill every month. If you pay the bill on time you will pay no interest. If you carry a balance to the next statement period you will pay interest.

Your card issuer will report to the credit bureaus. That will help you build credit, as long as you handle your card well.

Some secured cards have an annual fee. Others do not. The cards that don’t have annual fees often have higher interest rates, but remember that if you pay every bill in full and on time that won’t matter. You won’t be paying interest.

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.

Remember two key factors.

  • Payment history is the most important part of your credit score. Make your payments on time.
  • Credit utilization is also a critical part of your score. This is the percentage of your credit limit that you actually use. Keep your balance below 30% of your credit limit. Lower is better!

Here are some steps that will help.

  • Use your card. A dormant card will contribute less to your credit than an active card.
  • Pay every bill on time. On-time payments build credit. Late or missed payments kill credit.
  • Pay every bill in full. Any balance carried past the due date incurs interest. That’s money out of your pocket.
  • Watch your balance. Secured cards often have low credit limits. That makes it easy for your credit utilization to rise.

Here’s a proven way to build credit. Find a recurring monthly bill that you pay anyway, like your Netflix subscription. Make sure it’s under 30% of your credit limit. Put it on your card and set up an automatic payment from your bank. Your card will be active, the bills will be paid on time, and your credit utilization will stay low. Put the card away and forget about it.

You can even get a second secured card and do the same thing with another bill. If you use no-fee cards it won’t cost you a dime, except for the money you deposit, and you’ll get that back.

If your payment record is good some issuers will raise your limit above your deposit. That keeps your credit utilization even lower. Some will even move you to an unsecured card if you keep a good record!

The Best Credit Cards for Very Poor Credit

When you look at secured credit cards, consider these points.

  • Does the card have fees?
  • What is the APR (Annual Percentage Rate).
  • What is the minimum deposit?
  • Can you upgrade to an unsecured card if you establish a good record?
  • Will you earn rewards?
  • Does the card have a minimum credit score or other requirements?

Let’s look at some top credit cards for very poor credit.

Discover it Secured Card: A Secured Card with Rewards

The Discover it Secured Card is a top pick among secured cards. There’s no annual fee and the minimum deposit is $200. The regular APR is 22.99% (variable). You can upgrade to a secured card. The minimum recommended credit score is 350. There’s a surprising range of rewards for a secured card. You’ll get 2% back on purchases up to $1000 per quarter at restaurants and gas stations. There’s a 1% cashback reward on all other purchases. Just remember to keep your balance down! Don’t buy things you don’t need just to get the reward.

nRewards Secured Credit Card: No Fee and Low APR

The Navy Federal Credit Union offers the nRewards Secured Credit Card. There’s no annual fee and the regular APR is a variable 18%, unusually low for a no-fee card. The minimum deposit is $200 and upgrades are allowed. The minimum credit score is 350. You will have to be a member of the credit union. The card even offers rewards: one point for every dollar spent.

OpenSky Secured Visa Card: No Credit Check or Bank Account Needed

The OpenSky Secured Visa Credit Card does not require a credit check, and you can be approved even without a bank account. This is an option for people with no credit score or a score below 350. There’s a $35 annual fee and there’s a variable APR of 17.39%. There are no rewards.

First Progress Platinum Prestige Mastercard Secured Credit Card: Lowest APR

The First Progress Platinum Prestige Mastercard Secured Credit Card has no minimum credit score and you’ll only face a soft credit check with no impact on your credit. The variable APR on purchases is only 9.99%. There’s a $49 annual fee, though, so you’ll have to carry significant balances to make the low APR worth the fee. The minimum deposit is $200. There are no rewards.

Fingerhut: an Unsecured Store Card Option

Fingerhut is an online store that offers a store credit card aimed at people with bad credit. The application is easy and you’ll have a decision in seconds. There’s no minimum credit score or deposit but you will need to meet an income requirement and have a Social Security Number, among other requirements. They report to all three credit bureaus, so the card can help you build credit. The APR is a fixed 29.99%. Your credit limit will be assigned on approval.

If you use a Fingerhut account, make sure that you are buying items that you need and would have bought anyway. Also, be sure to check the price. Fingerhut offers easy credit, but many items are much cheaper at other stores. If you use it with caution this card could help you build credit, but if you’re not careful it could hurt your finances.

What’s In the Cards

If you look at these cards you’ll notice right away that in most cases the cards with no fees have significantly higher APRs. Most of the low-APR cards have annual fees.

That may seem like a reasonable tradeoff but consider these points.

  • If you pay every bill in full and on time you will never pay interest no matter what the APR is.
  • Most secured cards have low credit limits. If you do carry a balance it will be for a low amount. The interest saving from the lower APR will not justify the fee, unless you carry large balances all the time, which you should not do.
  • Cards with fees may provide more rewards, but you’ll have to spend a lot to earn enough rewards to equal the fees. It’s hard to spend that much with a low credit limit!

In most cases, a low-fee card will be your best bet. Worry about rewards when you have better credit, and protect yourself from interest by paying your bills on time and in full. A card with a fee may be an option if it’s the only one you can get.

Remember that a low minimum credit score does not guarantee approval. Issuers will look at your record and they may turn you down if they don’t like what they see.

What comes next?

You can get credit cards for very poor credit. Once you have one, you have a new challenge: get that credit score back where you want it to be!

You already have one valuable tool: your new secured card. Make your payments on time and keep your credit utilization low and you’ll be moving in the right direction.

Once you get a good pattern established with your secured card, consider another secured card. A credit-builder loan from a local bank or credit union or an online lender like Self will give you an installment loan on your record.

Know Your Credit, Fix Your Credit

In the long run, knowledge is the key to building better credit. Start by understanding how your credit score is calculated. Get your credit reports and learn to read them. Look for errors or signs of identity theft, and dispute any problems. You can do this yourself, and you should be very wary of anyone who promises to fix your credit: debt relief and credit repair scams are rampant.

Our article on rebuilding damaged credit should get you started. It takes time, but you can improve your credit, build your financial knowledge, and take control of your financial life at the same time!