Editorial Policy

Editor’s Pick: Best Credit Cards for People with Bad Credit

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By Eva Norlyk Smith, Ph.D.
August 9, 2010

In the past, it has been challenging to find low-fee, low-interest credit cards for people with bad credit. Currently, however, people with poor credit do have access to several reasonable credit card offers, both for secured and unsecured credit cards.

When applying for a credit card for people with bad credit, keep in mind that these cards, at least initially, will not really give you access to any significant line of credit. Rather, they serve as convenient payment instruments, and if used wisely, can be important tools for building a better credit record and create a more secure financial future. With this in mind, here is our pick for the best credit cards for bad credit in different categories.

Orchards Bank’s Classic MasterCards
For cardholders looking to improve their credit by getting access to a credit card, one of the best credit cards on the market is Orchards Bank’s MasterCard. The card comes in both secured and unsecured versions; the card issuer determines which type to offer applicants during the application process, based on their credit profile. In other words, those with credit scores down in the deep end of the spectrum can expect to be offered a secured credit card, in which case a deposit is required as security against the initial credit line.

However, regardless of which version of the card a consumer proves eligible for, the Orchard Bank credit cards for people with bad credit offer some of the most attractive terms in the subprime market. Annual fees are reasonable, weighing in at $35 for the secured card, waived for the first year. Unsecured card holders pay between $35 and $74 the first year and between $39 and $79 per year thereafter. Depending on your credit score, you may also have to pay a processing fee between $19 to $39 when applying for the credit card.

Cardholders with secured credit cards pay a variable 7.9 percent APR on new purchases and balance transfers (a reminder to not keep a balance, since you’re paying interest on credit secured by your own money on deposit). The unsecured credit card feature higher interest rates, ranging from 14.90 percent to 28.90 percent APR. Both are variable rates that will move up or down in tandem with the Prime rate. Those with bad credit can expect to pay the highest interest rate in that range, so to avoid paying an extra 28.9 percent a year on your purchases, be sure to pay off the balance in full each month.

A key benefit of the Orchard Mastercards for bad credit is that, for cardholders who manage their account properly, Orchard Bank’s card offers regular credit line increases. Best of all, the card reports to all three credit bureaus monthly, so good behavior pays off fast.

Other Credit Card Options for People with Poor Credit

Prepaid Credit Cards. For those less concerned about building credit and more interested in getting the convenience of paying with plastic, a prepaid credit card can be a cheaper and more convenient way to go. Because these cards don’t extend any credit, anyone can get approved regardless of credit history; users simply spend the money they load onto the card.

Low-cost options for prepaid credit cards include the Mango and YAP cards. Card usage is free for cardholders who load more than $500 into their account each month; otherwise the monthly fee is a reasonable $5. Loading money onto the card is free as long as it is via a bank account, online, or via direct deposit; if you load cash with select retailers, there is a $4.95 fee. There is also a $2 fee for cash withdrawal in addition to the ATM fees.

Local bank credit cards may provide another option for people with poor credit. Consumers who hold an account with a local bank will have an easier time obtaining a credit card from that financial institution. Acquiring a bank credit card can be another great way to improve your credit score, and build a line of credit over time at a reasonable cost.