How to Find the Best Unsecured Credit Cards for Bad Credit
JW
Last updated 03/15/2024 by
Jessica WalrackIs your bad credit score holding you back from accessing credit? It’s a Catch-22 that many people face. In fact, according to Experian, 16% of Americans have a credit score that is considered poor. However, even with bad credit, you might be able to get approved for certain credit cards without paying a deposit.
Here’s a closer look at unsecured credit cards for people with bad credit. Learn what to look for, our top four recommendations, and how they compare with secured credit cards.
Get Competing Personal Loan Offers In Minutes
Compare rates from multiple vetted lenders. Discover your lowest eligible rate.
It's quick, free and won’t hurt your credit score
How to find the best unsecured credit cards for bad credit
Before deciding on an unsecured credit card, consider the following factors.
Credit score range
Credit card issuers offer cards designed for different credit score ranges.
For example, say your credit score is 605. The Milestone Gold Mastercard is for individuals with scores from 550 to 650, while the Deserve Classic Mastercard is for those with scores from 650 to 850. If you didn’t know the credit range score for either card, you might apply for the Deserve Classic Mastercard and get denied (and discouraged). However, you would’ve qualified for the Milestone Gold Mastercard.
So look for a card that caters to your credit score.
Credit line
Your credit line is the amount you will be able to borrow on the credit card. In most cases, the larger the credit line, the better it is for increasing your credit score in the long term. However, if you are nervous that you will overspend, a smaller credit line would be more advisable.
Interest Charges
The best credit cards only charge interest on balances that carry over from one billing cycle to the next. If you pay the full amount of your balance each month, you can avoid all interest charges. Read carefully, however, to see how many days you have to make your payment as that can vary widely.
Fees
However, cards for individuals with bad credit scores usually come with additional fees, so you should read the fee schedule closely. The Consumer Finance Protection Bureau recommends you call your credit card company if you see a fee you did not authorize. You should also file a written billing error notice. If that doesn’t help you can file a complaint with the CFPB.
The most common fee is an annual charge. It can range from $0 to $495 per year, though the fee on most cards for bad credit will be under $100 per year. Additional fees can include a monthly service fee, a one-time upfront processing fee, foreign exchange fees, balance transfer fees, and cash advance fees. Also, take note of any penalty fees you might face, such as those for late or returned payments.
Rewards
Some credit cards offer rewards for spending in the form of cashback or points. While these are more common with cards for fair-to-excellent credit, you will find some options for bad credit as well. The rewards can help you to get more for your money.
Annual percentage rates (APR)
Check and compare APRs as this is the amount of interest you will pay per year on balances that carry over past a billing cycle. Note, cards often have different APRs for purchases, cash advances, and balance transfers. Many cards allow you to apply or prequalify without hurting your credit score.
Additional features
Lastly, look out for other features and benefits that come with the card and add extra value. For example, emergency support, an extended warranty, travel insurance, car rental insurance, etc.
Take note of all of these factors and pick the card that provides the best overall value for you.
4 best unsecured credit cards for people with poor credit
Which unsecured cards for bad credit stand out among the rest? Our top picks include the following four:
- Credit score range from 560 to 750
- Prequalify with no negative impact on your credit score
- Annual fee: $0
- Penalty fees up to $38
- The minimum credit limit is $300
- Access a credit limit increase after making five on-time payments
- No foreign transaction fees, 24/7 travel assistance, travel accident insurance, auto rental collision damage waiver, and extended warranty
- Credit score range from 550 to 650
- Prequalify with no negative impact on your credit score
- Maximum credit limit of $300
- Annual fee from $35 to $99 (depending on your credit score)
- Penalty fees up to $38
- Mastercard Gold Benefits
- Credit score range from 550 to 650.
- Prequalify with no negative impact on your credit score
- Annual fee from $0 to $99 (depending on your credit score)
- Penalty fees up to $38
- Maximum credit limit of $300
- Rental car insurance, travel and emergency assistance, roadside assistance, and extended warranty coverage
- Credit score range from 560 to 700.
- Prequalify with no negative impact on your credit score.
- Annual fee $0 to $75 (depending on your credit).
- 1% cashback rewards on all eligible purchases.
- Credit line increase opportunities, minimum is $300.
- Penalty fees up to $38.
- Credit protection option.
- Travel, accident, and auto rental collision insurance.
These cards allow you to apply online and find out exactly what APRs and fees you qualify for without impacting your credit score. Further, they are four of the easiest to get approved for as they are designed for people with credit scores below 600.
Unsecured vs. secured credit cards: What is the difference?
Unsecured credit cards do not require you to put down any deposit or collateral. You are assigned a credit limit and can charge up to that amount. However, secured credit cards require a deposit and the amount of the deposit becomes your credit limit.
Both cards enable you to pay off your balance over time as long as you make your minimum payment each month. Any balances that carryover will be subject to interest charges according to the annual percentage rate (APR) assigned to the account. Further fees may apply.
Here’s a quick comparison of the pros and cons of each card type.
Secured credit card pros and cons
Secured credit cards are typically for individuals with very poor credit. By putting down a deposit, you remove all risk for the credit card issuer. If you do not pay your bill, the issuer can use your deposit to pay your outstanding balance.
Next, let’s look at unsecured credit cards.
Unsecured credit card pros and cons
Unsecured credit cards for poor credit do present a risk to the issuer because if the cardholder doesn’t pay, the issuer doesn’t have any collateral to cover the loss. To control their risk, issuers typically charge higher interest rates while limiting credit lines to small amounts from $200 to $500.
Learn more about credit cards for bad credit.
Frequently asked questions about credit cards for bad credit
What is a guaranteed approval credit card?
Many people search for “guaranteed approval unsecured credit cards for bad credit,” but do they really exist? In truth, the only credit card with guaranteed approval is a prepaid one.
Anyone can get a prepaid card with no strings attached. While there are various credit cards (secured and unsecured) for people with bad credit, approval is never guaranteed.
Can you get a credit card with a 550 credit score?
It’s possible to get a credit card with a 550 credit score. Some secured credit card issuers allow credit scores as low as 300 and some unsecured card issuers allow for scores as low as 550.
However, keep in mind that card issuers look at more than just your credit score. You can be denied for other reasons, such as a recent bankruptcy, too high debt-to-income ratio, or other issues that present too much risk to the lender. The good news is you can usually find out if you prequalify without hurting your credit score.
How can you build your credit most efficiently with an unsecured credit card?
If improving your credit score is your primary goal, use the card on a regular basis, but keep the balance between 10% and 30% of your credit line. So, if your credit line is $300, keep the balance at or below $90. Further, always, always pay at least the minimum payment on time.
Managing your card this way shows you have self-control and can likely handle more credit in a responsible manner.
Review and compare unsecured credit cards
Ready to find the best unsecured credit card despite your bad credit? Great! Head over to our personal credit card review page to see dozens of credit cards side-by-side. Compare factors including credit score range, APR, fees, and more, to shortlist the best options for your situation. Then, get prequalified, compare your offers, and go with the best one.
JW
Jessica Walrack is a personal finance writer at SuperMoney, The Simple Dollar, Interest.com, Commonbond, Bankrate, NextAdvisor, Guardian, Personalloans.org and many others. She specializes in taking personal finance topics like loans, credit cards, and budgeting, and making them accessible and fun.
Share this post: