If you’re in a low-income household, the odds are you might
have been turned down for a credit card in the past. People with low or
inconsistent incomes are less likely to be approved for credit cards than those
with good credit ratings or higher incomes. The reasoning is that a low-income
client might struggle to pay off one’s debts, making that person less desirable
for a card. A card issuer will not want to give a card to someone who can’t
guarantee they will cover those expenses.
Applying for credit cards in your situation can be
frustrating, as you’re more likely to be rejected. This point doesn’t mean it’s
impossible to get a card, as you can still find many credit cards for bad
credit.
Many card providers will offer these low-income credit cards
to people looking to build their credit scores. By improving your score, you
can qualify for more financial services and receive better rates, which in turn
can save you even more money later. You could even find rewards through some
cards.
More importantly, a credit card for bad credit will provide
you with a means of paying off various expenses and bills you might incur. It
will be easier to manage many expenses with one of these cards.
But as useful as these credit cards can be, you should watch
for various points with whatever you use. You will be subject to various terms
and rules when getting a card.
You can check around to see what options are open, but understanding what fits will be critical to your
success.
While low-income households can benefit from credit cards for
bad credit, their main purpose is to help people build their credit histories.
Many low-income homes have poor credit ratings because they don’t have much
money and haven’t been able to qualify for loans or cards.
The low credit rating makes it harder for homes to qualify
for different benefits, plus they might struggle to find good rates on
financial services they can use. Working with financial services for those with
little to no credit is the best way to build a favorable rating.
Credit card issuers understand these concerns, which is why
they offer credit cards for low-income households. These companies will provide
cards that come with many benefits and in some cases won’t require a credit
check.
There are many things to spot when finding a credit card:
The annual percentage rate or APR is the yearly interest rate
on your card. The value of your APR will vary, but it will likely be higher for
a low-income card than for other cards. Expect to find an APR of anywhere from
25 to 35 percent on average.
The APR calculates how much interest will be added to your
unpaid balance during each period. The APR will be irrelevant if you pay your
balance in full on time, as people who pay off their cards all the way won’t
have anything that adds interest. But if you can’t pay it all off, you’ll have
to pay additional interest based on your outstanding balance.
You’ll have to pay a minimum amount on your card during each
period, which usually lasts for a month. You’ll be subject to fees if you don’t
complete a minimum payment. While paying off as much of your card as possible
is best, paying the minimum amount keeps you from incurring further fees. But
in doing so, you’re still going to pay interest on whatever you didn’t cover.
Annual fees may apply to some cards. The annual fee can be
worth less than $100 in most situations. Some cards may not have any of these
charges.
Credit cards for bad credit will take in people of all sorts,
including those with no prior credit history. You should still check the
required credit for whatever card interests you first, as there’s no guarantee you
will qualify for one.
One appealing part of credit cards involves the rewards you
can get. You can get various rewards from your purchases, including cash back
offers on select purchases. You could also qualify for reward points you can
use to cover various expenses or to earn different things. Each card has
different reward programs, so looking around to see what is open will help. Be
sure when finding a reward program that whatever you enter is something you’ll
realistically use.
A card will have a limit on how much you can use at a time.
Some cards for bad credit customers will have lower limits of about $1,000 to
$2,000. People with better credit ratings can get cards with higher limits like
$5,000 to $10,000.
While you’ve got many card providers, you’ll also have to
review the card network your card will belong to. Most credit cards for bad
credit belong to the Visa network, as it is the most accessible one around.
Some providers also offer cards in the MasterCard and Discover networks.
Don’t expect to find a card in the American Express network,
as American Express has higher requirements and standards for its clients. That
network is more for those with established credit histories who can also afford
to spend more money.
Some credit cards you’ll find are secured cards, meaning they
are connected to different assets that can be used as collateral if you are
unable to pay for something. It’s often easier for people with low credit to
get secured cards because they will have something to pay for expenses if
anything keeping you from paying off your debts happens.
After reviewing all the terms and features of a credit card
and seeing if it fits your needs, you can choose to apply for that card. There
are a few steps to follow:
Many credit card issuers offer free credit checks during the
application process, but it’s usually easier to consult a credit bureau for a
free credit report.
You’ll need to specify the card you want and
also list info on your income, your investments, and whatever assets you
have. If you’re going for a secured card, make sure you list info on whatever
you’ll use as collateral.
It can take a few business days for the issuer to get back to
you.
You’ll have to provide details on security measures you’ll
use for your card while also confirming the address that the card links to.
These methods will ensure you’re the only person who can use your card.
The timeframe for when you’ll get that card will vary by
situation. The virtual card you get will include the necessary info needed to
help you make purchases right now before the physical one arrives.
While a credit card can help you build good credit, you’ve
also got some concerns to observe. Here are some of the points to spot:
It takes a while to get a better credit rating with your
card, but you’ll find it’s easier to get newer and more useful cards when your
rating improves. As your credit situation builds, you can move on to other
cards that have more favorable terms and rates. Some of these better cards may
come with more appealing reward programs that offer more to you.
But when you go move on from your old card to a new one,
avoid closing the account on the old card. The lines of credit you have will
influence your credit score. Getting rid of an old line means reducing the
amount you can use, which can harm your score if that total is significant
enough.
While credit cards for bad credit can help you build credit,
it’s not always easy to qualify for them. There are two other options you can
use to build credit to help you eventually qualify for a credit card:
You can become an authorized card user on another person’s
card. In this case, you’ll sign an agreement to get on another person’s credit
card as an authorized user.
As an authorized user, you can make purchases with a credit
card, but the person who runs the account will be responsible for making
payments.
This measure can help you build your credit, but you’ll need
to discuss this plan with whoever you will work with. The card owner should
have limits on what you can spend, plus there should be a plan for how you’ll
pay back the owner for whatever you spend. This measure will help you build
your credit score because you’re working alongside another person to help you
get a higher score.
Don’t forget to also review the credit situation of whoever
has the card. Avoid dealing with people with poor credit histories, as their
struggles might harm your credit potential.
You can also consider applying for a store credit card,
especially if there’s a particular store you frequent often. A store credit
card lets you charge your purchases at a store it links
to.
This card option is useful because everything on that card is
centralized to a series of locations. Specifically, you can only use that card
in stores that the card links to. Some cards might let you use them elsewhere,
but the options are few. You could even qualify for some special discounts or
rewards when you use a store card.
Store credit cards do come with higher interest rates and
lower spending limits, so paying everything off will be critical. Many stores
will offer online platforms where you can monitor your card and pay it off
through there. You could even pay off the card balance at a store’s physical
location, although you’ll likely require cash or a check or a debit card to
cover it.
Low-income credit cards are available through many providers,
with these cards offering great ways for people to build their credit
histories. As you continue using and paying off your card, your credit score
will improve. You’ll eventually qualify for cards with better terms and
features, as you’re showing your ability to manage credit well.
These low-income cards still come with various concerns,
including higher rates and lower spending limits. Reviewing the terms of any
card you might use is necessary for ensuring you’re getting a card you can
trust while fitting your needs.