A credit card can be an excellent way to fund a large purchase, build good credit history, or even get special rewards for items you probably purchase on a regular basis, like gas or groceries. However, if you have a low credit score or don’t have very much credit history, it can be challenging to get approved.
If you have been searching for a credit card to help you reach your financial goals, but are having trouble with the approval process, you may want to consider a credit card designed specifically for someone with below average credit or no credit at all. These types of cards make it possible for a wider range of people to get approved, and when used responsibly can help build and improve credit over time. Read on to learn more about credit cards specifically for those with low and no credit.
Secured Credit Cards
When your credit score is too low for any of the traditional credit products offered by a financial institution it can be frustrating, especially when you know that a credit card can be a great way to help you build and improve your current credit score. Fortunately, there is a specific type of credit card called a “Secured” credit card that is designed to help you establish or rebuild your credit score. A secured credit card works by lending you credit in exchange for a security deposit. The amount of credit you are offered will often be equal to the amount you deposit, so if you make a deposit of $2,000, you will be offered a line of credit on a secured credit card of up to $2,000. At this point you might be saying to yourself, “if I had $2,000, why would I need a credit card?” But remember, the point of a secured credit card is not just to make purchases. The real benefit of the card is its ability to help you establish or improve your credit score.
If you spend $2,000 of your own money on a new computer, you will have a new computer. But, if you put that $2,000 down as a security deposit in exchange for a secured credit card and then purchase that same laptop with your new credit card, as long as you make payments on that purchase over the next few months, you will now have a new laptop and a history of paying back the money you borrow. Once you have done this several times, you will have established an excellent history of paying back your debts and will be far more likely to qualify for an unsecured credit card with a much higher credit limit and additional benefits like airline miles or cashback on specific purchases. If you do not have the necessary funds to make the initial deposit for a secured credit card, there are still options available. However, these types of financial products often come with a number of fees that can quickly add up if you are not careful. Check out the next section to learn more about what to look out for when considering unsecured credit cards for individuals with low to no credit.
Unsecured Credit Cards
While there are plenty of credit card options for someone with low or no credit, there also a significant number of options that will end up costing you more just to own than some of the most exclusive rewards cards available. Before applying for an unsecured credit card designed for people with low or no credit, be sure to check for annual fees or “membership” fees that often accompany these types of cards. You’ll also want to be on the look-out for an interest rate that changes over time. While a credit card may be advertised as having “No-Interest”, this is often only for a brief period of time, after which the rate will go up significantly. Lastly, be sure you take a look at where the credit card you are applying to can be used. In some cases a low or no credit card will only be accepted at a single retailer and will be much more like a store card than an actual credit card. These things aren’t necessarily bad, but it’s a good idea to understand some of the potential downsides before signing up.
1. https://www.nerdwallet.com/best/credit-cards/bad-credit 2. https://www.moneytips.com/secured-vs-unsecured-credit-cards 3. https://www.finder.com/secured-cards-vs-unsecured-cards-whats-the-difference