Credit cards for people with poor credit are probably easier to obtain than most people realize. Lenders have realized that providing credit to people with poor credit is quite a lucrative field. Interest rates are expected to be high and the existence of extra fees for proving these lines of credit are now the norm. Those with poor credit will pay more, but now have credit options that weren’t available years ago.

There are a variety if types of credit cards for people with poor credit, from prepaid to debit cards to secured and unsecured credit cards. Below is a brief description of each. These are provided so that borrowers with poor credit can see the advantages and disadvantages of each one.

Secured Credit Cards: These are credit cards for people with poor credit that require some type of security, usually in the form of a savings account. The amount that the cardholder has in their savings account is usually the amount of the credit limit on the card. The advantage is that it gives the cardholder a credit card to use for purchases, experience in maintaining a credit card and some history with the lender which may come in handy when applying for an unsecured card with the same company. It’s important to note that secured credit cards also usually carry extra fees for applying and processing. 

Unsecured Credit Cards: These are cards that require no security. People with poor credit may actually be approved for these cards with a very low spending limit. These are the cards that reflect well on a person’s credit if they keep the account in good standing and can destroy credit if the account is delinquent. The advantages of these cards are that there is no cash required upfront and the limit is gradually increased when payments are met on time. The disadvantages are that some of these cards require you to make monthly payments whether or not you have a balance on the card. However, if your payments result in an overpayment, the card automatically has an increase in the spending limit.

Prepaid: These are cards that can be bought in stores and reloaded with a phone call or by returning to the store. The disadvantage is that it may be difficult to make purchases with this card over the phone or online because the account holders’ address is actually where the card originates from rather than the individual that owns it. There are numerous fees associated with these types of cards including activation, processing, balance inquiry and usage fees. The advantage is that you cannot exceed your spending limit and the card may be used as a gift card or credit card in a variety of locations.

Debit Cards: Debit cards usually carry the “credit card feature” that enables the card to be used when a credit card is necessary, such as making a purchase online. These cards originate from the cardholder’s bank and carry minimal fees, if any at all. These cards carry do not help or hinder the credit report in any way at all.