If you have bad credit and are looking for a credit card, it pays to do some careful research first to make sure that you really get what you want. Credit cards for people with poor credit are often more expensive, because issuers charge higher fees to protect themselves against the increased risk of default. Many subprime credit cards also come with very low credit limits, often as low as $250.

The card that is best for you depends on your goals, so first determine what your needs are. If you need a card mainly for convenience, e.g. to make online purchases, book hotel rooms, rent a car, or make flight reservations, your least costly option will likely be a prepaid credit card. These are cards that you prepay money to, and like a checking account, you simply draw down the amount over time. There are many prepaid credit cards available, and the fees they charge vary quite a bit, so compare prepaid credit card offers to find the one with the lowest fees.

On the other hand, if your goal is to improve your credit, you may opt for an unsecured credit card for people with bad credit or for a secured credit card. Both these types of cards come with tricky rules and fees, so it’s important to read up on the terms before you apply. Otherwise, you could end up paying a lot for something you really didn’t want.

Here are eight questions to ask before applying for a bad credit credit card.

1. Which bank is issuing the card? There are many credit card offers for people with bad credit, but many of these are issued by the same bank. First Premier Bank, for example, issues not just the First Premier Master/Visa Card, but also cards like the Centennial and Aventium Gold MasterCard. The terms of cards issued from the same bank are often very similar, so knowing that saves you some time reading through the terms for every single credit card offer.

2. Is the credit card secured or unsecured? With secured credit cards, you deposit an amount in a bank account before you get the card, and this amount counts as security against your credit line. With unsecured cards, you get a low line of credit without depositing money first, typically around $250-$500. The advantage of secured cards is that you can get a higher credit line, if you deposit more money as security. Also, the fees may in some cases be lower. The disadvantage, of course, is that you have to come up with the money for the security deposit.

3. Are the terms clearly stated? If you have to look a long time on the online credit card application to find the disclosure of terms and fees, it’s usually a sign that the card issuer does not use above-board business tactics. Stay away from this type of card issuer, or you will likely live to regret it.

4. What are the fees? To determine the real cost of the credit card offer, make a list of all the fees, including opening fees, annual fees, monthly maintenance fees, and so on. Add them all up, and, if they are assessed before the card is used for the first time, subtract them from the minimum credit line offered. This will give you an estimate of the amount of credit you are likely to have available when you receive the card. Also look at other fees, such as late payment fees, over-the-limit fees, and fees charged for reviewing your account for a credit limit increase.

5. What is the APR on purchases? The APR, or annual percentage rate, is the interest rate charged on the purchases made to your card. A typical range will be from 9.99% to as high as 24.99%. If you’ll be carrying a balance on the card, the card with the lower APR may be the best choice, depending on the other fees charged.

6. Is there a grace period? The grace period is an interest free period. If you pay your balance in full each month, credit cards typically offer about a 21-day period before they begin to charge interest on the new purchases. Some subprime credit cards don’t have a grace period, in which case interest charges accrue from the day you make the purchase. For secured credit cards without a grace period, you’re charging against money you have deposited, so you’re essentially paying interest to the bank for lending you your own money. If this sounds like a bad deal, it’s because it is.

7. Does the card issuer report every month to the credit bureaus? If your goal is to improve your credit score, make sure to pick a card that clearly states that it reports every month to the credit rating agencies. This will ensure that you credit score increases fast, as long of course, as you make your payments on time.

8. Is the cost worth it? Once you know exactly what it will cost you to get the card, you can decide if it’s worth the cost. For the most part, with unsecured and secured credit cards, you pay a high cost in proportion to the credit limit you actually get. If your goal is to improve your credit score, you may decide that the cost is worth it. If not, again, you’re better off saving yourself some money by getting a debit card or a prepaid credit card.

Some of the triggers for a poor credit rating include having a lot of debt, not paying bills on time or not paying them at all, and declaring bankruptcy at any point.

There are three major types of credit cards for people with bad credit: unsecured credit cards secured cards, and prepaid credit cards. They have different pros and cons, and choosing the best depends on your specific credit situation and what your goals are. Here is a brief overview.

Unsecured Credit Cards

Unsecured credit cards can help rebuild credit faster, because most issuers of unsecured credit cards report every month to the major credit rating agencies. The fees could be quite high and the initial credit limit is typically small. However, it does increase over time if you pay your credit card bills on time.

If your goal is to rebuild your credit history, unsecured credit cards are a great tool, if you can afford the costs. The fees vary greatly between issuers, so read the terms and conditions to find the card with the lowest costs. To improve your credit rating using an unsecured credit card, always pay on time, and as much as possible, pay the balance in full every month.

Unsecured credit cards include the First PREMIER® Bank MasterCard® and Visa® cards, and the Centennial® Gold MasterCard®/Visa®. These credit cards for people with less than perfect credit are all issued by First PREMIER® Bank and offer similar terms.

Secured Credit Cards

Secured credit cards are a popular choice for people with bad credit. Acceptance is easier and the fees are comparatively lower. Like other bad credit credit cards, secured cards provide the convenience of credit cards and a means of rebuilding one’s credit.

As the name implies, this type of credit card is secured by a deposit into a special account held with the credit card issuer. Typically, a minimum deposit of $200 to $300 is required.

Secured credit cards are generally the least expensive in this category. The best secured credit cards charge no account opening fees and have a low annual fee, typically around $50. For more information about secured credit cards, check out this article on Bankrate.com, 10 Questions Before Getting a Secured Credit Card.

Prepaid Credit Cards

With a prepaid credit card, the cardholder doesn’t receive any line of credit, but rather spends money stored on the card via a prior deposit.

Prepaid credit cards can be used in all the same ways as a regular credit card, and still carry the Visa, MasterCard brand name. You simply need to make sure that you have preloaded enough money to fund your expenditures.

The fees of prepaid credit cards are often higher than for secured credit cards, however. Read the credit card terms and conditions and print the fee structure, so that you can avoid actions that incur extra charges.

The best prepaid credit cards are the ones with the lowest monthly fees. For example, check out Facecard Prepaid MasterCard® and Wired Plastic™ Visa® Prepaid Card.

Credit cards for people with poor credit offer a great short-term solution, but your best long-term option is to rebuild your credit rating so you can apply for the best credit card deals. For more advice on how to restore your credit rating, see this great article on Bankrate.com: Five Steps for Improving Your Credit Rating. Another helpful resource is Consumer Credit Counseling Service (www.cccservices.com, 800-355-2227), which offers free assistance and debt counseling.

As with any credit card, study the fine print carefully before you apply. In the case of these cards, it is even more important that you educate yourself on what you are getting and what the card can and cannot do. Here are some of the things to look for when considering a catalog credit card.

What products and services will be available to you? If you can, check out the website or catalog of the card issuer to see what you can purchase with your card and to make sure these are things you really need. As much as possible, compare the prices of the items with what you would typically pay in a regular store or website. If they require you to be a member to see the prices, it could be an indication that the items for sale are priced above typical market prices.

What will it cost you to get the card? Catalog cards mostly come with a one-time application fee, often around $150. Some of this may be refundable, if you cancel the card within a pre-specified time period. Study the terms carefully to see how much of a refund you are entitled to if you decide to cancel, and how long you have to cancel. Also check if there are any monthly maintenance fees or other fees associated with using the card.

Are there any hidden fees? Many catalog cards offer a slew of attractive additional services, such as unlimited access to your credit report, emergency road assistance, and prescription discounts. But remember, there is no such thing as a free lunch. Although it may sound like these services are included in card membership, you typically just get them free for 30 days. After that, you will pay a monthly fee for these services, often around $10 a month for services that give you free access to your credit report, and around another $20 a month for services like prescription discount or emergency road assistance.

In short, you could easily spend upwards of $30 a month for services you would otherwise not sign up for. That’s $360 per year, considerably more than the savings you are likely to accrue. You are often automatically enrolled in these services when you sign up for a catalog credit card, so read the fine print, and be sure to cancel any services you don’t want within the 30-day trial period.

What are the terms for getting the bonuses? Many cards feature attractive bonuses, such as a grocery coupon card, if you sign up for the card. Again, study the terms carefully to determine what the requirements are to get the bonus. In some cases, the issuer will require you to be enrolled for six months in an elite program for which you pay a monthly fee. A typical monthly elite member fee is around $20, or $120 over six months. This is a costly way to get grocery coupons, if the services featured as part of the elite membership are not something you really need.

How do you make the monthly card payments? For most catalog cards, when you submit the application for the card, you also authorize the card issuer to debit your bank account for the application fee and, each month, for the minimum monthly payment. If you always keep your checking account current and have enough money to pay for these charges, this should not be a problem, as long as you are aware that the charges are coming. If not, you could end up bouncing checks and paying costly NSF fees.

How often does the card report to the credit bureaus? Check the terms to see how often the card issuer reports your card activity to the credit bureaus. You want a card that reports monthly, preferably to all three credit bureaus, but at least to one. As long as you are regular with the monthly payments on your card, frequent reporting to the credit bureaus will help you to more quickly rebuild your credit rating.

What is the annual fee and APR? Most catalog cards have no recurring annual fee and charge no interest on purchases. But remember, you never get anything for free. Such favorable terms could be an indication that you pay a premium for the products available for purchase from the card issuer.

The Bottom Line

If you set clear goals, a catalog credit card can be an excellent tool for rebuilding your credit rating. Pay your dues on time and leave a small balance on the card, just enough to show up on your credit report. But be sure you have the financial discipline to use the card. If you get carried away and run up additional debt with card purchases you don’t really need, a catalog credit card will just undermine your financial situation further.

With an initial credit line of upwards of $7,500 and offers of frequent credit line increases, these cards can appear like a real find. This is especially the case for people with bad credit, who otherwise can choose only among unsecured credit cards with limits as low as $300, or prepaid credit cards, where money has to be preloaded onto the card before it can be spent.

There is one critical difference between catalog credit cards and standard credit cards, however. You can use a catalog credit card only to purchase products and services sold by the card issuer. In other words, a catalog credit card will not give your budget the cash infusion that a standard credit card would add.

The main advantage of getting a catalog credit card is that it enables you to faster rebuild your credit and get offers for standard credit cards with high limits. Catalog credit cards report frequently to one or more of the major credit bureaus, and as long as you are regular with your payments, this will help you to quickly make strides towards improving your credit.

Here is an example:

If you apply for an unsecured credit card for people with bad credit, the best you can hope for is an initial credit line of $300. This credit line will increase regularly as long as you keep current on your credit card payments. However, it will take a long time to build up to the kind of credit line you get with a standard credit card.

In contrast, if you take out a catalog credit card with a $7,500 line of credit, for example, your credit report will show that you are responsibly handling a credit card with that high a credit line. Over time, this might prompt other lenders to offer you a standard credit card with a high limit, e.g. $5,000.

If you decide to get a catalog credit card, beware of impulse purchases that get you deeper into debt. You will receive many tempting offers for things you may or may not need. Before spending money on something, evaluate if this is something you would normally purchase, and if the cost is reasonable.

Also be sure to carefully study the Terms and Conditions of the card, and play the rules to your advantage. Otherwise you could end up spending money on a card that offers you a lot of services and goods that you don’t really need.

The key to benefiting from Catalog Credit Cards is to educate yourself and become a savvy consumer. Read the next section to learn the important things you need to know if you are considering taking out a catalog credit card.

What are the fees? Look for a card that offers the most reasonable rates. Some cards charge upwards of $150 in application and processing fees to open the card, and in addition levy sizeable monthly charges. The range of fees varies considerably from card to card, so you can make substantial savings by doing your homework.

The details of the fees charged may be located deep in the Terms & Conditions, so look through all the headlines in the membership agreement until you find the section on Fees and Charges. There are often many types of fees associated with both issuing and using the card, so you need to add up all the fees to get a complete picture of how much it will cost you to get and use the card.

How many vendors will accept the card? While some cards are accepted widely (e.g., at all the locations that accept Visa or MasterCard), others may be limited to fewer places of acceptance. Be sure to pick the card accepted in the locations where you will most likely need it.

Is there a limit to how much you can load on the card? Many cards put a maximum on the amount that you can store on the card, typically $2,500.

How easy is it to load money on the card and what is the fee? For some cards, you have to mail in the amount you wish to deposit. Others have multiple physical locations where you can load money, or they allow you to transfer money directly online or via your bank. Make sure you pick a card that gives you an easy way to load money. Most cards charge a fee each time you load money, so look for a card with a low loading fee.

Does the card carry a rewards program? Some prepaid cards allow you to earn points every time you use the card. These points can be redeemed for specific services such as, for example, credit towards your wireless phone bill. If a card advertises very attractive benefits, such as roadside assistance and dental and prescription discounts, study the details of the offer. Typically, you pay an extra membership fee for these services, e.g. around $15 a month, which is rolled into the monthly fees you pay for your card. You may not want to pay such additional fees unless these are services you know that you need.

Does the card issuer send automatic paper statements? Some cards only offer e-mailed statements. If you are not a regular computer-user, this may not be a convenient way for you to receive your statements. However, if you want to receive paper statements, you often have to pay an extra fee, e.g. $6.95 per month, and you may have to call each month to request that the paper statement be mailed. If you are not a computer user, you need to weigh the extra cost and trouble against the other card benefits.

Does the card provide liability protection for unauthorized charges? While standard credit cards won’t hold you liable for unauthorized purchases, the terms for prepaid credit cards tend to be more stringent. Most cards will limit your losses from unauthorized charges to $50, but you must call within a pre-set period, e.g. two days, to notify the card issuer that your card is missing. Be sure to familiarize yourself with the specific liability terms of the prepaid card you choose.

A prepaid card essentially gives you a means to convert your money into electronic currency, giving you easy access to money without having to carry cash. It is different from a regular debit account in that it is not tied to a checking account; you simply load value to the card directly.

Here are some of main advantages of prepaid credit card:

• It offers the same purchasing conveniences as a credit card. It is safer to carry than cash, and it enables you to shop online, rent cars, make travel reservations, and pay your bills online or over the phone.
• It builds financial discipline. Unlike standard credit cards, with a prepaid credit card you can’t spend money you don’t have, so you don’t have to worry each month about how to pay your credit card bill. In this way, a prepaid card helps keep you out of debt.
• It can help you qualify for an unsecured line of credit. In many cases, a prepaid credit card enables you to build a relationship with a lender, which in turn may qualify you for an unsecured line of credit down the road. Some prepaid card issuers will review your card history on a regular basis, e.g. every 90 days, and based on that may consider you for a traditional credit card with a line of credit.
• More convenient than a checking account. Most users find that a prepaid credit card gives greater convenience than a checking account. It has a wider range of uses, is more universally accepted, and you won’t have to worry about bounced checks and overdraft fees. If there is no money in the account, your purchase will simply get declined at the point of sale.
• Most cards guarantee acceptance. In most cases, anyone over 18 can apply and get accepted for a card, irrespective of their credit rating and credit history.

One disadvantage of prepaid credit cards, of course, is that they don’t give you access to a line of credit; you can only spend your own money. But if you are already in debt, that might not be such a bad thing.

Another disadvantage is that in many cases, you pay considerable fees for the convenience of having a card. Typical initial fees include a start-up fee, a processing fee, and an activation fee, which for some cards total in excess of $150. In addition, most cards have a variety of maintenance fees, which over a year can total a considerable amount of money.

The fees that you pay for prepaid cards vary widely from issuer to issuer, so do your homework before applying for a card and study the fine print carefully before you select the offer you feel best fits your need. Click here to learn more about what to look for when comparing prepaid credit cards.

How high is the annual fee? All secured cards come with an annual fee, and these vary considerably between issuers. There is no need to pay a high fee when you can get a card for much less, so shop around till you find a card with a low annual fee.

Is there an application fee? Some card issuers charge an application fee, some do not. Don’t just go with the first offer you come across, but look for an issuer that will process your application for free.

Do other fees apply? Some secured cards come with a monthly maintenance fee and/or fees to increase your line of credit or to access your bill online. If you can, choose a card that does not charge for these services.

Does the issuer report to all major credit bureaus? Most card issuers report your payment history to at least one of the major credit bureaus. However, since a main advantage of getting a secured card is to help you restore your credit history, make sure to pick a card that reports to all the major bureaus. Of course, if you default on your payments, this will become a double-edged sword. If you are not sure you are able to keep up regular payments on a card, you are better off going with a prepaid card, where you can only spend the money you have.

How long will it take to qualify for an unsecured card? Most secured cards come with higher annual fees and interest rates than regular credit cards, so it’s in your interest to shift to a regular, unsecured card as soon as possible. If you are a good customer, most issuers will offer you an unsecured card after about a year, but verify this before signing up. To make sure you qualify, show that you have enough discipline to use a secured card responsibly. Always pay on time and, as frequently as possible, pay your balance in full every month.

In contrast, with a secured card, you make a one-time security deposit in a bank account, and then make monthly payment on your card as you would on a regular credit card. The deposit is only drawn down if you default on your payments. In addition, if you maintain a regular payment history, the card issuer will often reward you by increasing your credit line without requiring you to add to your security deposit.

At first, your line of credit will be equivalent to the amount you have deposited in the bank account. If you maintain a regular payment history over time, however, the card issuer will typically increase your line of credit beyond the security deposit. The collateral required varies between card issuers, but something in the range of $300 to $500 is most common.

Secured credit cards offer the same payment convenience as regular credit cards, and they are accepted everywhere where Visa and Mastercard are accepted. They can be an excellent option for people who have bad credit or no credit. It is easy to get approved; even people who have gone through bankruptcy may be able to qualify. The main thing you have to do to qualify is to have the money to deposit into a savings account.

Getting a secured credit card can be a great way to build or rebuild your credit history, because most card issuers report your payment history regularly to the main credit bureaus. This will help improve your credit report faster, provided, of course, that you always pay on time.

Secured cards are also a good stepping stone for getting considered for a regular, unsecured credit card. If you maintain a history of on-time payments over a 12-18 month period, most card issuers will either offer you a regular unsecured credit card or increase your credit limit on your current card above your security deposit.

Does the card issuer report regularly to the three credit bureaus? The main reason for having an unsecured credit card is to start you down the road to building a good credit history. Some small issuers do not report regularly to the credit bureaus, so check this point before deciding on a card. Be aware, however, the more frequent reporting is a double-edged sword—if you have a late payment or some other type of default one month, the credit bureaus will be alerted immediately. So be sure to exhibit financial restraint, stay current with your payments, and as much as possible, pay your balance in full each month.

What is the APR? Many cards offer a favorable annual percentage rate, e.g. 9.9%, which is comparable to what you might be offered with a standard credit card. But be alert that that rate will increase dramatically if you default in any way on the card agreement. Even paying your account a couple of days late could cause the APR to increase to 25.99% or more. Study the fine print, so you know what the default rate is and what would trigger it.

What are the fees? Credit card companies protect themselves against the higher risk they take on with these cards by charging higher fees. Most unsecured credit cards for people with bad credit come with an annual fee, which may range from $25 to $95. In addition, you may face one-time charges, such as an account set-up fee (often around $30), and a program fee (e.g. around $90). Typically, unsecured cards also have recurring annual charges, such as a participation fee or an account maintenance fee, ranging from $70 to more than $140 per year. You may also be charged for internet access, for customer service, and for each time you get a credit line increase.

The start-up fees are charged to your card up front, so they will reduce the credit you have available until they are paid. For example, you may be assigned a credit line of $300, but face $175 in upfront fees and charges. That means that when you receive your card, you will already owe $175, and you will only have access to a remaining credit of $125. Of course, once you pay down the initial bill, you will have access to the full $300 line of credit.

Some cards come with lower initial set-up fees, so you will have more credit available when you receive the card. In turn, however, these cards may charge a higher recurring maintenance fee each month, so the card may actually be more expensive to carry than a card with higher upfront costs. Study the Terms and Conditions carefully and compare the total cost per year for each card; then choose the card that best fits your needs.

How often does the card get reviewed for credit line increases? Some card issuers automatically review your card on a regular basis to determine whether you are eligible for a credit line increase. It is to your advantage to choose a card that helps you build your credit line faster. Be sure to check if there is a fee associated with credit line increases.

Does the account feature an automatic payment plan? Some credit issuers require you to enroll in an automatic payment plan in which the monthly payment gets deducted from your checking account each month. Unless you keep careful track of these automatic deductions, you could end up with bounced checks and NSF charges. You would also face charges from the credit issuer if there are insufficient funds in your bank account when the automatic withdrawal is made. You need to do an honest assessment of your earnings and spending patterns to see if you have the financial means and discipline to work with a plan like this.

As with everything in life, there are plusses and minuses associated with unsecured credit cards. Remember that these cards serve you best if your goal is to rebuild a strong credit history. Use the card to your advantage by turning it into a tool for increasing your financial discipline. Always pay on time, and as much as possible, stick to small purchases, so you can pay off the card in full every month.