Today, we’re going over the best credit cards for bad credit and building credit.
Because having little to no credit can make it tough to find credit cards with great approval odds, and being denied a credit card can make your credit worse.
But here’s the truth!
If you currently have bad credit or little to no credit, there are options available for you with very high chances of approval.
That’s even if you have a credit score between 300 and 629.
And when you combine the right card with superb habits, you have the best formula for building great credit.
By the way, if you want to learn how to get business credit quickly, be sure to read this post next.
Now let’s dive into the best credit cards for bad credit and building credit.
Credit Card Characteristics
For reference, our choices for the top picks came down to three things:
- No or low annual fees
- Approval odds
So let’s go ahead and list them down!
Top 3 Credit Cards For Bad Credits
1. Discover it® Secured Credit Card
For many reasons, the Discover it® Secured Credit Card is one of the best (if not the best) credit-building companions for those with little to no credit.
First, there is no annual fee, which leaves money in your pocket.
It reports to all three credit bureaus, giving you the opportunity to build and fix credit across all Bureaus.
Unlike most secured cards, it actually provides cashback rewards of:
- 2% at gas stations,
- restaurants up to $1,000 per quarter, and
- unlimited 1% cashback on all other purchases.
By the way, they currently have a welcome bonus called Discover’s Cash Back Match that will double all cashback rewards earned at the end of the first year.
And… ready for the finishing move?
After 8 months, Discover automatically reviews your account for transition to an unsecured card and return of your deposit.
Yes, automatic review. This means with responsible use, you have the chance to move to an unsecured card in less than a year.
Note that, secured cards do require you to submit a deposit that acts as your credit limit, and the minimum deposit for this card is $200 – which is pretty standard.
There are two cons of this credit card.
The first one is that the card is not widely accepted outside the United States, which could be an issue for those who travel internationally often.
The second is that the initial deposit for your credit limit must come from a bank account so those without one won’t be able to make use of this card.
Overall, the Discover it® Secured Credit Card is hands down, one of the best credit cards for bad credit and building credit that was ever created.
2. Secured Mastercard® from Capital One
This is another no annual fee secured card with clever features that is a no-brainer for those who would like to build and repair their credit.
As mentioned previously, secured credit cards require a security deposit that becomes your credit limit.
And while the Secured Mastercard® from Capital One does require a deposit like all the rest, Capital One does it differently. Capital One does it better.
You see, while other secured card credit limits match your deposit, if you qualify, this card allows you to have a higher credit limit than what you deposit.
Which is unheard of for secured cards.
For example, you can make a deposit of $49, $99, or $200 to receive a credit line of $200.
It can increase your limit up to $1,000 when you make more than the minimum deposit before you activate your account.
But wait, there’s more.
You don’t have to pay the deposit upfront.
Capital One allows you to pay your deposit in installments of $20 or more, as long as it is paid in full by the 35th day after you are approved.
If you are tight on a budget but still want to build your credit, this is a major plus for this card.
With this card, when you make consistent monthly payments on time, you have the opportunity to have your credit limit increased automatically.
That is without needing to deposit more money. Thus, giving you access to more cash than you used as collateral.
Another big plus is that Capital One is widely accepted outside the United States, which makes this card a good option for international travelers.
Sounds good, right?
But let’s now discuss two cons of this card that we want you to be aware of.
The first con is that there are no rewards, unlike the Discover it® Secured Credit Card.
The second con is that the APR on this card is pretty high, at an ongoing Variable APR of 26.99%. Which only affects you if you do not pay your card in full on a monthly basis.
The third con is that a bank account is required to qualify, which renders this card useless for those without one.
Overall, the Secured Mastercard® from Capital One is an outstanding option for those who prioritize lower deposits and higher credit limits over rewards like cashback.
3. OpenSky Secured Visa Card
This secured credit card has two major features that set it apart from the Discover it® Secured Credit Card and Secured Mastercard® from Capital One.
The first major feature is that the OpenSky Secured Visa Card is a rare card that allows you to qualify for the secured credit card without a credit check.
Yup, you read that right.
So if you are struggling to get approved for a secured credit card, this is an outstanding option for you.
The second major feature of the OpenSky Secured Visa Card is that it does not require you to have a bank account to qualify like most other secured credit cards do.
Therefore, giving those without bank accounts an uncommon opportunity to get a secured card.
In addition, this card reports to all three credit bureaus TransUnion, Equifax, and Experian.
There are three cons to keep in mind with the OpenSky Secured Visa card.
The first con is that there is a 35% annual fee which makes it the only card on our list with an annual fee.
But when put into perspective, the $35 annual fee is on the cheaper side when compared to other annual fees for secured credit cards.
The second con, and likely the most impactful, is that you do not have the ability to upgrade to an unsecured card.
This leaves you two options once you do improve your credit:
- You will have to close it which may affect your credit utilization and length of credit history.
- You will have to keep it open and pay the annual fee.
For this reason, if you can qualify for one of the other cards mentioned, they are 100% a better option.
If you are not able to qualify either because of your credit or lack of bank account, the OpenSky Secured Visa card is a stellar option.
4 Credit Card Tips
So before we let you go, we want to share 4 credit card tips to help you maximize your efforts to repair and build your credit.
Tip #1: If you choose an unsecured credit card, be sure to choose an issuer that reports to all three credit bureaus.
Tip #2: If you can qualify for a bank account, it’s worth applying for a low-fee checking account or a second chance checking account that will help you qualify for the secured credit cards that require a bank account.
Tip #3: If you incur a late payment fee, try calling and asking for it to be removed as a courtesy. You may be surprised by how willing your credit card issuer is to work with you on fees.
Tip #4: Keep your credit card usage below 30% utilization for the best credit scores. This means if you have a credit limit of $200, you want to keep your balance, below $60 which is 30% of $200.
Well, there you have it, the 3 best credit cards for bad credit and building credit.
Now if you don’t have bad credit (or need to build one), here’s our post on the best business credit cards for everyone.
Or if you want to see the best business checking accounts, be sure to read it after.
If you need more help with your current financial situation, work with our CFO services today! Our team of experts is always ready to help.
Give us a call now!