Credit Cards for Bad Credit: Best & Worst of 2018

Paul Soucy

Last updated on March 30, 2018

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Using the right credit card the right way can be Step 1 in transforming a bad credit score into a good one.

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Find the right credit card for you.

Whether you want to pay less interest or earn more rewards, the right card's out there. Just answer a few questions and we'll narrow the search for you.

Our pick for

Low deposit

Capital One Secured Mastercard Credit Card

on Capital One's secure website

on Capital One's secure website

Annual Fee

$0

Regular APR

24.99% Variable APR

Intro APR

N/A

recommended credit score

Our pick for

No credit check

Capital Bank Open Sky Secured Credit Card

on Capital Bank's secure website

on Capital Bank's secure website

Annual Fee

$35

Regular APR

19.14% Variable APR

Intro APR

N/A

recommended credit score

Our pick for

Rewards and upgrading

Discover it Secured Credit Card

on Discover's secure website, or call (800) 347-0264

Rates & Fees

on Discover's secure website, or call (800) 347-0264

Rates & Fees
Annual Fee

$0

Regular APR

24.99% Variable APR

Intro APR

10.99% on Balance Transfers for 6 months

recommended credit score

Our pick for

Low interest and fees

Digital Federal Credit Union Visa Platinum Secured Credit Card Credit Card

on Digital Federal Credit Union's secure website

on Digital Federal Credit Union's secure website

Annual Fee

$0

Regular APR

13.25% Variable APR

Intro APR

N/A

recommended credit score

Summary of Credit Cards for Bad Credit: Best & Worst of 2018

Credit CardBest ForIntro APRRegular APRAnnual FeeLearn More
Capital One Secured Mastercard Credit Card

Capital One® Secured Mastercard®

on Capital One's secure website

Low depositN/A24.99% Variable APR$0

on Capital One's secure website

Capital Bank Open Sky Secured Credit Card

OpenSky® Secured Visa® Credit Card

on Capital Bank's secure website

No credit checkN/A19.14% Variable APR$35

on Capital Bank's secure website

Discover it Secured Credit Card

Discover it® Secured

on Discover's secure website, or call (800) 347-0264

Rewards and upgrading10.99% on Balance Transfers for 6 months24.99% Variable APR$0

on Discover's secure website, or call (800) 347-0264

Digital Federal Credit Union Visa Platinum Secured Credit Card Credit Card

Digital Federal Credit Union Visa Platinum Secured Credit Card

on Digital Federal Credit Union's secure website

Low interest and feesN/A13.25% Variable APR$0

on Digital Federal Credit Union's secure website

Credit CardBest ForIntro APRRegular APRAnnual FeeLearn More
Capital One Secured Mastercard Credit Card

Capital One® Secured Mastercard®

on Capital One's secure website

Low depositN/A24.99% Variable APR$0

on Capital One's secure website

Capital Bank Open Sky Secured Credit Card

OpenSky® Secured Visa® Credit Card

on Capital Bank's secure website

No credit checkN/A19.14% Variable APR$35

on Capital Bank's secure website

Discover it Secured Credit Card

Discover it® Secured

on Discover's secure website, or call (800) 347-0264

Rewards and upgrading10.99% on Balance Transfers for 6 months24.99% Variable APR$0

on Discover's secure website, or call (800) 347-0264

Digital Federal Credit Union Visa Platinum Secured Credit Card Credit Card

Digital Federal Credit Union Visa Platinum Secured Credit Card

on Digital Federal Credit Union's secure website

Low interest and feesN/A13.25% Variable APR$0

on Digital Federal Credit Union's secure website

OTHER RESOURCES

What is considered bad credit?

Every lender defines bad credit in its own way. In general, though, a credit score below 630 (on a range of 300-850) would be considered bad credit or poor credit.

Multiple factors go into credit scores. Some are relatively minor — applying for a new credit card, for example, can knock a few points off anyone’s score temporarily because it suggests a need for more financial resources. Others are more serious. Bankruptcy, charge-offs or missed payments can do major damage to credit scores.

The costs of bad credit

Credit scores are designed to measure one thing: How much of a risk it is to lend someone money. The lower the perceived risk, the higher the score. Having bad credit limits your options for borrowing money: If you can get a loan at all, you’ll pay higher interest.

There are other costs, too. Even though they’re not designed as such, credit scores have come to be interpreted as a general measure of reliability. Employers, landlords, insurers, cell-phone providers, utility companies and others use them to evaluate customers or applicants.

A NerdWallet survey found that many people are unaware of these effects. Significant numbers of Americans didn’t know that bad credit could prevent them from renting an apartment (23%), raise their car insurance costs (43%), limit their options for cell-phone service (49%) or force them to provide security deposits for utility service (52%). Further, 1 in 5 respondents thought a score of 600 — which is bad credit — was enough to qualify for any credit card.

If you have bad credit, or no credit, a card designed specifically for someone like you is usually the quickest and easiest way to build credit.

Choosing a credit card for bad credit

Credit cards for bad credit typically come with low credit limits and high interest rates. That’s OK for now, because the primary purpose of these cards is to help you build credit or rebuild credit. When choosing a card, focus on:

  • Reporting to credit bureaus. A card will help you build credit only if it reports your payments to the companies that assemble the credit reports that are the basis of credit scores. Look for a card that reports to all three major credit bureaus. Note that prepaid cards do not report to the credit bureaus because they do not involve borrowing money.
  • Low fees. Unsecured credit cards for bad credit often boast that you can apply for them with no deposit. But then they hit you with annual fees, maintenance charges and other credit card fees that can easily top $100 a year. Good secured credit cards have either no annual fee or a fairly small one, and no hidden charges. You do pay a deposit — but you can get that money back.
  • Free credit score. Look for an issuer that provides free access to your score so you can track your progress. Ideally, the issuer would also offer other resources such as debt-payment calculators and free financial education programs.
  • A path to upgrade. Once your credit improves, it’s nice to be able to convert your account to a card with better terms. If you have a secured card, will the issuer transition you to a regular unsecured card? If you have an unsecured card for bad credit, can you move up to a version with no fees or one that offers rewards?

Read more in our guide to choosing a credit card for bad credit.

How to raise your credit score using a credit card

A low credit score isn’t a life sentence. It’s a starting point. Using a credit card responsibly is one of the fastest ways to build credit. Follow these tips:

  • Use the card. Building a good credit history starts with making on-time payments. So use your credit card regularly and pay your bill before your due date.
  • Don’t overuse the card. A key element in your credit score is your credit utilization, or how much of your available credit you’re using. A maxed-out card is a sign of someone in financial trouble. So keep utilization below 30% at all times. On a card with a $300 credit limit, for example, that means you should keep your balance under $90.
  • Pay on time and in full. With any credit card, the best move is to pay your entire balance in full every month. That way, you’ll never pay interest — and the interest rates on credit cards for bad credit are typically very high. If you can’t pay in full, pay at least the minimum amount due by your due date.
  • Track your progress. Check your credit score and credit report regularly to see whether you’re moving in the right direction or if other things are holding you back. You can get free access to your credit score and credit report on NerdWallet
  • Keep accounts open, if possible. The age of your open credit accounts is a factor in your credit score. So don’t close accounts unless there’s a compelling reason, such as an annual fee on a card you don’t plan to use. When it comes time to upgrade from a secured card to an unsecured one, see if your issuer will let you keep your same account.

CREDIT CARDS TO AVOID

Many credit cards that are marketed to people with bad credit are expensive. These cards might not require a security deposit, but they impose an array of steep fees just for the privilege of carrying and using them. These can include application fees, processing fees, activation fees and monthly “maintenance” or “membership” fees, in addition to annual fees.

Add up those fees, and they can easily cost you more over the first couple of years than the deposit on a good secured credit card — and, unlike a security deposit, the fees you pay are money you’ll never get back. These cards can even cost more to carry than some of the best rewards credit cards on the market. Their ongoing interest rates tend to be high as well.

NerdWallet recommends you steer clear of products like these:

FIRST PREMIER BANK CREDIT CARD

The fees on the First Premier Bank Credit Card are truly eye-popping. For starters, there’s a $95 processing fee before you even get your card. Then there are ongoing fees that depend on your credit limit. For example:

Fees in first year Fees second year and beyond
Credit limit Annual Maintenance Annual Maintenance*
$300 $75 $0 $45 $75
$400 $100 $0 $45 $75
$500 $125 $0 $49 $124.80
*Maintenance fees are billed monthly: $6.25 per month = $75 per year; $10.40 per month = $124.80 per year

This convoluted fee structure owes its existence to a provision of federal law. Under the Credit Card Act of 2009, the fees on a credit card in the first year the account is open can’t exceed 25% of the credit limit. Processing fees are charged before you open the account, so they don’t count against the 25% cap. After the first year, there are no limits, so that’s when monthly maintenance fees kick in. As a result, you’ll pay between $120 and nearly $175 a year in fees for this card. On top of it all, the APR on this card was 36% as of February 2017 — one of the highest interest rates on any card.

HORIZON GOLD CARD

The banner across the top of this card’s website reads: “Bad Credit, No Credit? Low Score? NO PROBLEM.” In reality, though, there are multiple problems. The Horizon Gold card advertises an unsecured $500 credit limit, but you might have to read the website carefully to recognize that it’s simply a store card that you can use at just one place: the Horizon Outlet online mall. The “membership” fees required to use this card come out to nearly $300 a year, and there’s even a one-time $5 “issuance and account validation fee” just to get the card. This card’s issuer, Horizon Card Services, offers several other cards, all of which can be used only at the Horizon Outlet. They include the NetFirst Platinum card, the Freedom Gold, the Merit Platinum and the Group One Platinum.

CREDIT ONE CREDIT CARDS

Credit One Bank — not to be confused with Capital One — specializes in credit cards for those with less-than-great credit. Its offerings include the Cash Rewards Visa Card and the Platinum Visa for Rebuilding Credit, as well as the Official NASCAR Visa. The Credit One website is maddeningly vague about what kind of card you’ll end up with if you apply. For example, your annual fee could be anywhere from $0 to $75 in the first year and $0 to $99 after that. You may or not get a grace period. You might get rewards on all purchases, or only some, or none. There are also complicated, confusing rules on when your payments will post and when your available credit line is refreshed after making a payment. Our recommendation: Don’t bother trying to figure it out, and don’t bother applying.

Surge Card
Matrix card

As of February 2017, these cards were charging a $125 annual fee in the first year for a minimum credit line of $500 — 25% of the credit limit, the legal maximum. In the second year, the annual fee drops to $96 — but you start paying $10 a month in maintenance fees, for total fees of $216 a year. The APR, meanwhile, was a whopping 30.49% as of February 2017. The Surge Card and Matrix Card are offered by Continental Finance. That company has several other cards with similarly jaunty names and the same janky terms: the Reflex Card, the Fit Card and the Verve Card.

TOTAL VISA

Like the First Premier Bank Credit Card, the Total Visa starts laying on fees before you even open your account. If you apply and are approved, you must first pay an $89 processing fee to get your card. The annual fee in the first year is $75. In the second year and beyond, the annual fee drops to $48 — but you start paying a monthly processing fee of $6.25, which comes out to $75 a year. Put them together, and the Total Visa card will cost you $164 in the first year and $123 every year thereafter. To top it off, this card’s APR as of February 2017 was 29.99%.

INDIGO PLATINUM MASTERCARD

According to the website for this card, the annual fee depends on a cardholder’s creditworthiness. It might be $0, it might be $59, or it might be $75 the first year and $99 every year thereafter. Which one will you pay? You have to apply to find out for sure. It’s safe to say, though, that people with bad credit are more likely to end up with a $75/$99 fee than a $0 fee. Even $59 is significantly more than you would pay in annual fees on a good secured card. The APR on the Indigo Platinum as of February 2017 was 23.90%. That’s high but within the typical range for a credit card for bad credit. You can do worse than this card — but you can also do much better.

MILESTONE GOLD MASTERCARD

The Milestone Gold is offered by Genesis Bankcard Services, the same company that’s behind the Indigo Platinum. It, too, has fees that depend on creditworthiness: $35 a year, $59 a year, or $75 in the first year and $99 in subsequent years. Adding a layer of confusion, the first year’s fee might be divided between an “account opening fee,” which you pay before the account goes live, and an “annual fee,” which you pay afterward. This may be a way to avoid running afoul of the 25% rule. The APR is the same as on the Indigo Platinum, and our general assessment is the same: not the worst card, but far from the best.

Methodology

NerdWallet's credit cards team selects the best cards in each category based on overall consumer value. Factors in our evaluation include fees, promotional and ongoing APRs, and sign-up bonuses; for rewards cards, we consider earning and redemption rates, redemption options and redemption difficulty. A single card is eligible to be chosen in multiple categories.

Last updated on March 30, 2018

To recap our selections...

NerdWallet's Credit Cards for Bad Credit: Best & Worst of 2018

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