Unsecured Credit Cards for Bad Credit - NerdWallet

Unsecured Credit Cards for Bad Credit – NerdWallet

If you have bad credit (FICO scores of 629 or below) but hope to get a credit card, you have options. Your best bet is typically a secured credit card because you’ll provide an upfront deposit as collateral.

Unsecured cards, on the other hand, don’t rely on collateral. As a result, it can be more of a challenge to qualify for an unsecured credit card with bad credit.

Still, unsecured credit cards for bad credit are available — but choose carefully. Some are decent options you can use on your journey to building your credit so you can qualify for other cards later on. Others charge a laundry list of mysterious fees and place strict limitations on how and where you can use the card. Even if you have bad credit, you can do better than those products.

Unsecured cards that are OK options

Some unsecured cards for bad credit keep the fees relatively minimal and offer a path to an eventual credit limit increase. They’re not cards to hold forever, but with responsible use (including paying your bill on time and, ideally, in full each month), you can build your credit scores to a range where you’ll be eligible for a wider variety of cards later on.

Blaze Mastercard

The Blaze Mastercard, issued by First Savings Bank, charges a $75 annual fee, which isn’t ideal. But after some time, if you have a record of paying on time, you can call and ask customer service if you’d be eligible for a lower annual fee. You may also qualify for a credit limit increase in six months (initial credit limits can range from $350 to $1,500). And though the card charges up to a $25 fee for late payment, you wouldn’t be subject to a higher penalty APR.

Prosper Credit Card

The Prosper Credit Card, issued by Coastal Community Bank, is designed for those who are building credit — according to a Prosper representative, 80% of cardholders have credit scores below 660. You can see whether you’d qualify for the card without affecting your credit score. It charges a $39 annual fee, which is comparatively modest, and you can get that fee waived for the first year by opting in to autopay before your first statement arrives. Initial credit lines range from $500 to $3,000, and Prosper will review your account every three months to see if you qualify for a credit line increase. However, depending on your payment history, you may find your credit limit stays the same or may even decrease.

Indigo Platinum Mastercard

With the Indigo Platinum Mastercard, issued by Celtic Bank, the annual fee you’d qualify for can vary depending on Indigo’s review of your credit profile. For example, it might be $0, $59 or $75 for the first year and $99 afterward. Thankfully, you can pre-qualify for the card without affecting your credit score, so you’d get a preview of the cost before you commit.

Cards to avoid

With lower-cost options available, there’s just no reason to pay sneaky fees or put up with strict limits on where you can use the card. Here are some products to avoid:

Surge Mastercard and Reflex Mastercard® Credit Card

The Surge Mastercard and Reflex Mastercard® Credit Card are both issued by Celtic Bank. They offer an initial credit limit of $300 to $1,000, with the ability to qualify for a credit limit increase after six months. Depending on your financial situation, you’ll be charged an annual fee of up to $99, and you may be subject to a $10 monthly maintenance fee, which adds $120 to the yearly cost of carrying this card. What do you get for $219 a year? Nothing you can’t get for less.

NetFirst Platinum

The NetFirst Platinum promises an instant $750 credit line if you qualify, which is possible with less-than-perfect or even no credit. But you can only use it to shop on the Horizon Outlet, an online retailer. And the credit line won’t be reported to any credit bureaus, so it’s not going to help you establish credit. There’s no upside to this card with a monthly membership fee of $14.77, a bit more than $177 per year.

Other credit cards for bad credit

Secured credit cards

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Maybe you were hoping to avoid a secured card, but they might be a better fit as you build credit. The Discover it® Secured Credit Card, for example, has an annual fee of $0. And while it does require a security deposit of at least $200, remember that unlike the fees you’ll incur with an unsecured card for bad credit, your deposit on a secured card is refundable. Plus, with this card you’ll earn 2% cash back at gas stations and restaurants on up to $1,000 in combined spending each quarter and 1% cash back on all other purchases. It also comes with a sign-up bonus, which Discover phrases this way: “INTRO OFFER: Unlimited Cashback Match – only from Discover. Discover will automatically match all the cash back you’ve earned at the end of your first year! There’s no minimum spending or maximum rewards. Just a dollar-for-dollar match.

Nerdy tip: Discover features an excellent suite of unsecured credit card products. Once you’ve demonstrated responsible use with its secured product, it may be possible to upgrade to an unsecured card.

Alternative credit cards

A number of startups and financial technology companies have launched cards in partnership with issuers that can consider factors beyond your credit scores, like your income and assets, when they evaluate your application. These so-called “alternative” cards may be worth a look, especially if you lack the funds for a security deposit:

Chime Credit Builder Visa® Credit Card

Chime Credit Builder Visa® Credit Card

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The Chime Credit Builder Visa® Credit Card, issued by Stride Bank, is technically a secured card, but there’s no required security deposit. Instead, the $0-annual-fee card works in tandem with a Chime checking account with at least $200 in qualifying direct deposits. Move whatever sum of money you choose from the checking account to your Credit Builder secured account, and that becomes your spending limit. Payments are reported to the three main credit bureaus, but maxing out the card won’t affect your credit because credit utilization isn’t one of the factors that’s reported. The card offers an autopay feature, called Safer Credit Building, to prevent late payments. There’s also no APR, so you can’t be charged interest.

Petal® 1 “No Annual Fee” Visa® Credit Card

Petal 1 "No Annual Fee" Visa® Credit Card

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The Petal® 1 “No Annual Fee” Visa® Credit Card, issued by WebBank, has a $0 annual fee and earns 2-10% cash back at select merchants. It offers a credit limit running from $300 to $5,000, depending on creditworthiness, which may be determined in part by your cash flow.

Petal’s Leap program allows you to earn a credit line increase in six months when you make on-time payments of at least the minimum due (or 15% of your statement balance, whichever is greater). Your Vantage credit score must also not drop more than 50 points from your Leap credit score goal. The card reports to all three main credit bureaus.

Tomo Credit Card

Tomo Credit Card

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With the Tomo Credit Card, your bank account balance (determined when you link one or more bank accounts through Plaid, a third-party service provider) is one of the more important factors in your eligibility. You don’t need a security deposit or even a credit score to qualify for the card. The $0-annual-fee card, issued by Community Federal Savings Bank, earns 1% cash back on all purchases. Every seven days, a payment is automatically deducted from your bank account to cover your spending on the card. Since the card doesn’t let you carry a balance, there’s no APR. The card reports to all three credit bureaus.

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