It is easy to get discouraged when trying to find credit cards that will help you establish your credit. However, the reality is that it is possible to find unsecured credit cards for bad credit. All you need is the right one. Here are the main factors to bear in mind when comparing unsecured credit cards for bad credit:
Annual fees: The best unsecured credit cards for bad credit will offer you zero annual fees. In addition, they will not report you to credit bureaus, which means you won’t be getting future credit or invitation letters. Be wary, though. Many credit card companies do report you to these agencies, which means you could end up paying more in interest later. The best unsecured credit cards for bad credit are those that charge an annual fee only for the first year and then do not report your status to credit bureaus.
Cash back bonuses: Many credit card companies provide their clients with cash back bonuses. These bonuses can amount to substantial savings, especially if you can earn them consistently. For example, the best unsecured credit cards for bad credit borrowers who establish stable payment histories may provide a twenty percent cash back bonus over the course of twelve months. You should, therefore, look for a card that provides this type of generous bonus program.
Limited credit histories: Credit cards tailored for those with poor credit histories may not provide you with all of the features you need. If you have prior bankruptcy or foreclosure in your credit history, it will negatively impact your ability to receive the cash rewards associated with such programs. Therefore, it is important to look for a company that limits the number of years in which you must maintain your membership.
Lower than normal utilization rate: Although it may sound good in theory, a company that charges a low utilization rate may not be the best choice for you. As previously mentioned, those with bad credit scores are often more likely to default. A high usage rate will reflect poorly on your utilization history, which could lead to your interest rates increasing over time.
Higher than average annual percentage rate (APR): If you are looking for the best unsecured credit cards for bad credit, look for ones that offer higher than average annual percentage rates. Those with the lowest APR are usually offered by the issuers with the highest loan balances. The reason these cards have extremely high rates is that they carry a very high risk of interest rate hikes. If you have poor credit, chances are you will not pay off your balance in full each month, which will leave you with an extremely high debt to income ratio. If you make regular payments, you will help to improve your debt to income ratio, but it will not improve your score very much.
No credit check approval: One of the best unsecured credit cards for bad credit are those offered by companies who don’t perform a credit check on their customers. These companies will typically offer an unsecured credit card only if you demonstrate proof of a steady job and a checking account. They then approve you for a set limit and charge you an appropriate annual fee. Once you deposit money into your account, you can use the credit card any time you like. Many of these no credit cards carry a higher annual percentage rate than traditional cards, but you will be approved without a credit check.
No deposit option: Many secured and unsecured credit cards for bad credit offer the option of no deposit. Basically, if you do not pay your bill in full by the due date, you are required to make a one time deposit to the account in order to make payment. Since there is a risk of missing a payment, the interest rate on this type of account is often much higher than other forms.