Editorial Policy

Is a Credit One card good for building credit?

Erica Sandberg

June 20, 2014

QHi Erica,

If you have bad credit, is it worth having a Credit One card with an annual fee for the year to help with building your credit back up? — Diamond

ADear Diamond,

Credit One is a bank that specializes in providing credit cards to people who have poor credit histories. Should you get one? It's not a bad idea, as long as you meet the following conditions:

  1. Your true intention is to prove that you're a responsible borrower.
  2. You know exactly how to treat credit cards.
  3. You are 100 percent committed to the credit re-establishment process.

If your answer is no to any of these points, stop. Learn more before proceeding.

Because of the annual “membership” fees, which range from $35 to $99, these accounts will set you back serious money right from the get-go. And, the costs can really escalate if you charge in the wrong way. In short, you must never use the card to finance something over time, nor should you take cash out with it.Ask Erica

Aside from the annual fees, the interest rates that Credit One assesses are nosebleed high. According to its website, the APRs for many of its credit cards are nearly 24 percent. The national average is 15 percent.

Then there's the cash advance fee. If you were to take money out of the account instead of using the card to pay for purchases, you'd be charged 8 percent of the amount you withdraw. That's double what most credit card issuers assess for the same service! In the best of times cash advances are rarely a good idea, but in this case, it's financially toxic.

But, let's say you are fine with paying the annual membership fee. Now, you have to be sure that you're going to use the card to your advantage. The strategy is simple:

  1. Identify one regular, affordable expense in your budget. This might be groceries, gas or a gym membership.
  2. Charge that single expense with the card, every month. Add no others to the card.
  3. Pay the bill in full. Ignore the temptation to pay anything less than the total balance.
  4. Send your payment before the due date. Consider automatic bill pay, so the money is automatically deducted from your checking account and will always arrive on time.
  5. Monitor your statements. Go online and read them often. It is important that you are always fully aware of your balance (to avoid further temptation to charge more), and to spot potential fraud and errors early.

If you do all the above, you will add positive information to your consumer credit report, and your credit rating will rise. It won't erase past problems, but since recent activity is weighed more heavily than older actions, you'll improve your record significantly in as little as a year. After that, you should be able to qualify for a credit card with more preferable terms — no annual fee, a lower interest rate (just in case you're ready to safely spread the cost of an item out over a month or two) and a profitable rewards program.

Sound doable? Don't complete an application with this particular company just yet. Check out other offers issuers are extending to people with bad credit. You may find something better, so take the time to shop around before deciding on one.

Got a question for Erica? Send her an email.