Finding a credit card when you have bad credit can seem next to impossible, but there are a lot of bad credit credit cards available on the market. These cards are designed for people who cannot get other types of credit cards, and as such, they do come with a few restrictions. Bad credit credit cards, however, are also a great way to improve credit.
Bad Credit Credit Cards
Bad credit credit cards typically have higher interest rates and fees than standard credit cards, and they rarely come with any kind of rewards. They also tend to have low credit limits. This allows a bank to extend credit to a high-risk customer without taking on a lot of risks themselves. High fees and interest are a hedge against the higher number of people with bad credit who default, while the low credit limit makes sure that the bank doesn’t lose too much on any one customer.
Make Your Payments on Time
The good thing about having one of these cards is that by making payments on time and for at least the minimum amount due, it’s possible to raise your credit score fairly quickly. For this reason, they are recommended to people who want to repair their credit and get back on their feet financially. In many cases, just six months of on-time payments can raise a credit score by about fifty points.
Watch your balance go up
Of course, as soon as your credit score goes up, start shopping around for a better card. Some banks will automatically raise a credit limit as your credit score goes up, but you will probably have to call the bank to get a reduction in your interest rate. If you pay your balance in full every month, you might also want to look for a card that gives you cashback or other types of rewards for using it.