Credit cards provide a lot of convenience for consumers. You can use them in a variety of places, including online. Credit cards are also a good way to build your credit score, which can be important when you apply for other loans, housing, and even insurance.
There are two main types of credit cards — secured and unsecured. The common belief is that you need good credit if you want an unsecured card. However, there are some unsecured credit cards for bad credit. Here’s what you need to know.
- The difference between secured vs. unsecured credit cards
- Can you get an unsecured card with bad credit?
- Unsecured credit cards to consider if you have bad credit
- Why we picked these particular cards
- Frequently asked questions
The difference between secured vs. unsecured credit cards
A secured credit card is one that requires a deposit (or security) in order for you to have an account. If you default, the money you provided as a deposit can be used by the issuer to offset its losses.
On the other hand, an unsecured credit card is one that requires no deposit. Instead, your financial reputation is enough for the card issuer. The issuer takes on the risk in the event that you default, since there’s no security for it to fall back on.
|Secured Credit Card||Unsecured Credit Card|
|Credit limit||Typically equal to the cash you deposit||Varies based on your creditworthiness; can be quite low if you have little or bad credit|
Why you might want to get a secured card
A secured credit card can work well for those who wish to build or rebuild their credit without a large cost and with some potential perks. For example, the Discover it Secured card has a $0 annual fee, and you can earn 2% cash back. The security deposit is refundable, so if you switch to an unsecured Discover it card later, you get your deposit back.
With an unsecured card, you might have to pay an annual fee if you want cashback rewards. A comparable card to the Discover it Secured might be the Capital One® QuicksilverOne® Cash Rewards Credit Card — it offers 1.5% cash back and is unsecured — but you’ll pay an annual fee of $39.
Another reason to consider a secured card is that you can get a higher limit if you have the cash to use as a deposit. Many cards, like the Discover it Secured, will issue you a credit line equal to your deposit. With unsecured credit cards designed for those with bad credit, you might end up with a credit limit of $500 or less. In fact, my first unsecured credit card as a student with a thin credit file came with a limit of $200.
So, if you’re looking for a way to rebuild your credit, possibly with some perks and the chance to get a solid credit line, a secured credit card can be a good choice. You might not need a secured credit card, though. And, in some cases, an unsecured card might be your best option.
Why you might want to get an unsecured card
If you’re just looking to get started with credit or don’t have the cash for a deposit, unsecured credit cards designed specifically for bad credit can help you move forward. Additionally, an unsecured card might (but not always) come with a higher credit limit. Because your credit limit isn’t based on your deposit, your credit issuer might take a chance on you.
Finally, an unsecured card doesn’t put your cash at risk. With a secured card, if you end up defaulting, the creditor can immediately claim your deposit, and you’re out the money. An unsecured card doesn’t carry that same level of risk. A creditor can sue you for the money, but they aren’t automatically entitled to what you owe them — they have to take extra steps.
Can you get an unsecured card with bad credit?
Even if you have poor credit, you can typically still get an unsecured card. There are specific unsecured credit cards designed to give those with bad credit a second chance — or help you build from scratch.
Be forewarned that unsecured cards for bad credit are likely to have a low credit limit to begin with (although this can be a good thing to keep you from getting in over your head again). Plus, some unsecured credit cards for bad credit come with annual fees that can be pretty steep. Finally, the interest rate on a lot of these cards can be quite high — often above 20% APR (annual percentage rate). You’ll need to pay off your card each month to avoid costly interest charges.
All of this to say that you can indeed get an unsecured card with bad credit, but you’ll need to pay attention to the fine print.
Unsecured credit cards to consider if you have bad credit
If you’re looking for unsecured credit cards specifically for people with bad credit, these four can be good choices. They allow you to start rebuilding or building credit without onerous requirements — and even come with some perks and incentives.
|Card||Annual Fee?||Rewards and/or Features|
|Credit One Cash Back Rewards Credit Card||Varies||
|Capital One® QuicksilverOne® Cash Rewards Credit Card||$39||
|Capital One® Platinum Credit Card||$0||
|Discover it Student Cash Back||$0||
Credit One Cash Back Rewards Credit Card
Nearly anyone can get the Credit One Cash Back Rewards Credit Card, even if they have bad credit. However, the rewards you have access to and the fee you pay might be determined by your credit history. On the plus side, you’ll be able to track your credit progress by getting your Experian score free each month. You may also get some cash back, depending on the card you end up with.
However, you have to watch out for the annual fee because you won’t know what you’re actually going to pay until you complete the application. You’ll pay somewhere in the range of $0 to $75 for your first year and $0 to $99 in subsequent years.
QuicksilverOne Cash Rewards from Capital One
One of the bonuses of the Capital One QuicksilverOne Cash Rewards Credit Card is that you can earn unlimited 1.5% cash back. Additionally, the annual fee is a relatively modest $39. The fact that you can be considered for a credit line increase starting as soon as six months after account opening is a nice bonus that can help you improve your credit utilization fairly quickly.
Capital One Platinum Credit Card
If you don’t want to run the risk of a high annual fee, the Capital One Platinum can be a good choice. It doesn’t come with any rewards, but you also won’t pay a fee for using the card. With the Capital One Platinum, as with the QuicksilverOne, you Aget automatic consideration for a credit line increase in as little as six months, and you get access to CreditWise monitoring to stay on top of your credit situation.
Discover it Student Cash Back
As a student with a thin credit file, the Discover it Student Cash Back card can be a solid choice. It doesn’t come with an annual fee, and there are solid cashback perks. It’s a good card to use if your credit is low because of a thin file or past mistakes. However, you do have to share what school you attend. Grad students can apply, which makes this card useful for those who are older students with poor credit.
This is also one of the few cards with a lower APR. Plus, there’s an intro APR for 6 months of 10.99% (on balance transfers that post to your account by January 10, 2021).
Why we picked these particular cards
We chose these cards based on their fees and features, as well as the ability to provide for a range of poor credit experiences.
If your file is thin because you’re young and a student, it makes sense to look at the Discover it Student Cash Back card. However, the Credit One card is available for those with particularly poor credit, and many people are able to qualify (although in extreme cases, you might be rejected). Both the Capital One cards can be acquired by those with credit scores below 600 — as I discovered back in my own days of credit hardship.
All four of these cards report to the major credit bureaus, so they could help you improve your credit score over time.
Frequently asked questions
Can I get an unsecured credit card with a 500 credit score?
Although a credit score of 500 or lower can lessen your unsecured credit card choices, you still have options. Some card issuers offer unsecured card products specifically designed for individuals with poor credit or a lean credit profile. However, unsecured credit cards for poor credit typically offer a low credit line, may charge an annual fee, and often charge relatively higher interest rates.
What credit card can you get after bankruptcy?
When your credit is recovering from bankruptcy, getting approved for a credit card can be challenging. There are many secured credit card options. These will require you to supply a cash deposit that will typically be the equivalent of the credit limit for the card. Some secured cards, like the Discover It Secured Credit Card, let you rebuild your credit while earning rewards, too.
Are there credit cards for bad credit with no deposit and instant approval?
There are indeed no-deposit credit card products available for applicants with bad credit. These products are called unsecured credit cards and don’t require a cash deposit. However, whether and how quickly you’re approved for the card will depend on each card issuer’s underwriting criteria.
What's the easiest unsecured credit card to get approved for?
If you’re a student who’s looking to build your credit, the Discover it Student Cash Back may be a good option. With a $0 annual fee, and the ability to earn 5% cash back in rotating categories each quarter on up to $1,500 in purchases, and 1% cash back on all other purchases, it’s a starter card that pays.
For those who aren’t students, the Capital One Platinum can help you build sound credit practices. It also features a $0 annual fee, but it will start you off with a lower credit limit. You will be automatically considered for a credit line increase in as little as six months.
How does an unsecured credit card help me rebuild my credit?
As you make on-time payments toward your unsecured credit card, your card issuer will report the account’s status and payment history to the credit bureaus. Over time, the data from your responsible credit card borrowing habits are used to calculate your credit score. Factors like a good debt utilization ratio (i.e. how much credit you’ve used compared to your accessible credit line) and consistent, on-time payments are positive signals to credit bureaus.
Remember: Using your credit cards responsibly is important
As you build or rebuild your credit, it’s vital to be careful about how you use your cards. Consider making a budget and only making purchases that you can pay off immediately. This will help you build credit without paying interest or getting in over your head with debt.
It’s possible to come back from poor credit. I know. I made my own mistakes, but I was able to recover and get credit cards later. You can even get a credit card after bankruptcy. If you approach the situation with a plan and work to get out of debt, you can fix your credit and apply for even better cards down the road.