CNN Money did a piece in which they reported on detail on the 7 best credit cards for people with bad credit. They found seven credit cards that are the champions of the banking world, providing low fees and low interest rates to people who are trying to rebuild their credit.
I really like the fact that there are companies out there that are not purely looking to prey on people who have experienced economic difficulties; and are willing to offer people an affordable way to establish credit.
Here are the seven credit card superstars for folks with bad credit. I’ll provide a summary here, and for more detail you can see the original article.
1. Orchard Bank credit card from HSBC
Orchard Bank offers four different credit cards for people with poor credit. Three are unsecured, and one is a secured card. You apply for a card, and the bank will decide which one you qualify for. The annual fees on the unsecured cards range from $39 to $59, and the APRs go from 14.9% to 19.9%, depending on your credit history.
19.9% may sound like a lot, but is actually pretty good compared to what other many banks offer to people with poor credit. Some cards carry rates as high as 29.9%.
Orchard Bank’s secured card requires a $200 refundable deposit, and carries an APR of 7.9% – not too bad at all.
“I like these [Orchard Bank] cards because let’s say you’re on the bubble between bad and poor credit, you might be able to get a better deal with one of these cards,” said Beverly Harzog, credit card expert at Credit.com. “Even if you do have really bad credit, this is one of the easiest unsecured cards to get, and if you don’t qualify then see if you like the terms of the secured card.”
2. Capital One Secured MasterCard
As the name indicates, this is a secured card. A deposit of only 49 bucks will get you a credit limit of $200. If you increase your deposit to $200, your credit limit can go as high as $3,000. Meanwhile the annual fee is only $29. The catch? The APR is a hefty 22.9%, so if you get one of these cards you must make sure to pay off the balance in full every month.
“It’s more of a secured card than an unsecured card, but it’s both, which is very nice,” said Curtis Arnold, founder of CardRatings.com. “And some people just don’t have 200 bucks to put down as a deposit, so only having to put $49 down is great.”
3. Navy Federal ‘n Rewards Secured Card
This is one of the best credit cards for people with bad credit. You don’t have to be in the military to qualify, but you have to have ties to people in the military (to see if you qualify, click here). The card is issued by the Navy Federal Credit Union, has a low 8.99% APR and no annual fee. This is an astoundingly good offer for someone with poor credit. It’s also a rewards card. The cardholder gets points that can be redeemed for merchandise.
“I realize not everyone can apply for this, but the terms are really good and there are a lot of people who have military ties and can become a member of NFCU,” said John Ulzheimer, personal finance expert at SmartCredit.com.
4. Citi Secured MasterCard
This is of course a secured card, but the unique thing about it is that they place your deposit in a CD, where it earns interest for you. The annual fee is fairly low at $29, but the APR is a bit high at 18.24%. So this is a good card if you’re just trying to re-establish credit, but avoid this one if you think you might carry a balance.
“Normally I would never recommend a card with an interest rate that high, but if someone is using it to just rebuild credit and not carrying a balance, you get to invest your money in a CD so you’re getting something back,” said Beverly Harzog, credit card expert at Credit.com.
5. Mango Prepaid MasterCard
Prepaid cards are a different type of creature altogether. They don’t loan you money. There is no “credit” involved, and they don’t report to the credit bureaus, which means that prepaid card will not help you rebuild your credit. The cards are simply loaded with your money, either from your bank account or paid in cash. They have no interest rate and work just like debit cards. They have been an alternative for some time for people with poor credit who can’t qualify for a regular credit card. The problem with prepaid cards, however, is that they typically carry high fees. You pay to buy a prepaid card, and to reload it with funds when it runs out.
The Mango Prepaid MasterCard is not so bad. Its fees are among the lowest in the industry. There’s no activation fee, no reloading fee, and no charge for customer service calls. You do get charged 2 bucks for ATM withdrawals (typical with prepaid cards) and 50 cents to check your balance at an ATM.
“Prepaid cards are good for someone who has no bank account, doesn’t have money for a deposit, or isn’t ready for a credit card,” said Beverly Harzog, credit card expert at Credit.com. “It’s important not to step back into the credit card game if you’re not ready to control your spending.”
6. Capital One Cash Rewards for Newcomers
By “newcomers” they mean new immigrants to the USA. That’s their target market. But anyone can apply. This is basically a rewards card with a high interest rate. The APR is a whopping 24.9%, and the card offers 1% cash back on all purchases, and 2% on travel purchases. You can get that cash back anytime as a credit to your account or a check. So this is a great card for someone who makes regular purchases and has the discipline to pay the balance off in full every month. For someone who can’t control their spending and carries a balance, it’s a disaster.
7. Open Sky Secured Visa Card
This is as good as it gets for people with bad credit. The APR is only 9.75%, and a deposit of $200 gets you a credit line up to $3,000. There’s a $50 annual fee, and a $25 fee to increase (or decrease) your credit limit after a year. That’s about it.
“So many other cards nail you with tons of extra fees that you don’t even know about, but this one is really just that $50 right up front,” said Bill Hardekopf, credit card expert and CEO of LowCards.com.
And here’s something cool: the card is issued by Public Savings, who says they will accept anyone, with no credit checks. They report to all three credit bureaus, which helps you rebuild your credit.
These seven cards represent the best deals out there for people with bad credit histories or low credit scores. Look at them all carefully and choose the one that best suits your circumstances. Be careful, protect yourself financially, and happy hunting.