Difficult to get? Yes. Impossible? No. These two strategies will help.
Maybe it’s a history of bankruptcy. Maybe you have charged off medical bills. Or maybe you just made some mistakes in the past with your credit cards and are looking for a fresh start.
Whatever your specific circumstances may be, the end result is the same… with bad credit, most banks won’t approve you for unsecured credit cards.
So what are your options? Here are two different approaches you can take.
First Strategy: Get a “fee harvester” card
This is not something I would recommend, but I’ll tell you about it anyway since it is an option.
There are a few unsecured credit cards for bad credit which almost anyone can qualify for, but they charge outrageous fees and rates.
The most well known examples are First Premier Bank, Centennial (which is also owned by First Premier), Applied Bank, and Continental Finance.
I don’t advocate any of these. Here’s an example of why…
First Premier Bank MasterCard. To say it has a lot of fees would be an understatement!
So it’s true that this card has an unsecured credit limit of $300. But is that worth paying $170 for? (The $95 processing fee + the $75 annual fee). Then there’s a the 36% interest rate to boot.
This is a waste of money and let me explain why. Even though this is an unsecured credit card, the amount of money you have to give them upfront is close to (or even more than) what some secured cards require for a security deposit.
With security deposits, you get the money back when you close the card. However with these fee harvester cards, the processing and annual fees is cash in the trash that’s gone forever.
And lastly, did you know that regardless of whether your account is secured or unsecured, it will look the same to anyone viewing your credit report?
This is because your credit report will only show the name of the card’s issuing bank. It won’t say the card name. So even if the card has “secured” in its name, that’s not what it will show on your report.
So this means that ironically, getting an unsecured credit card from one of these banks that specializes in bad credit (i.e. First Premier) might actually look worse on your report, when compared to a secured card from a more respected bank.
For these reasons, I would recommend a good low cost secured card instead. And which is the best? Here is my favorite one in 2015.
Second Strategy: Gas Station and Dept. Store Cards
Store branded cards are typically easier to qualify for than an unsecured bank issued Visa/MasterCard.
With bad credit, you’re not going to qualify for the good store cards like the Costco American Express or the Gap Visa card. But you might qualify for the basic Gap card for store-use only and similar offers.
Some of the easiest unsecured cards to get approved for are from gas stations. Again, I’m not talking about their Visa/MasterCard branded cards, but rather their basic gas cards. The Chevron personal card (pictured right) is an example.
Obviously this card is far from exciting. It offers no rewards, has a high APR, and you can only use it at Chevron gas stations. But being that you have a bad credit history, your goal is to start at the bottom and work your way back up. A basic unsecured card like this is a good way to get your foot in the door.
Credit cards from jewelry stores are also known for having lax approval requirements. You would think it would be the opposite since jewelry is so expensive. But because they have such high profit margins on what they sell (often times the markup is 100% to 300% higher), they can afford to extend credit to riskier borrowers. Even if a good chunk of cardholders default, they’re still making a profit overall.
You don’t want to use store cards as you’re only strategy for rebuilding credit. In order to get approved for cards from the prime banks like Chase, Citi, Discover, and so forth, you will first probably need to have one or two major credit cards; Visa, MasterCard, Discover, American Express.
Where to begin?
I would recommend beginning with two cards to start out; one from a retail store or oil/gasoline retailer and another that’s a general use Visa or MasterCard that has global acceptance. Together, those will be a good start. As explained above, you already know my opinion of those unsecured cards for people with bad credit; their fees are way too high! This is why, for your major credit card, I think secured is definitely the best way to go. But of course, the choice is ultimately yours.