Bad credit · continued
Credit Cards for Bad Credit
Understanding the High Interest Rate
Cards for bad credit typically carry high APRs, and there is no way around this at the lower end of the credit spectrum. The interest rate, however, only matters if you carry a balance from month to month. If you pay your statement balance in full every month, you are not charged interest on purchases at all, which means a high APR becomes largely irrelevant to your cost of using the card.
This is why the standard advice for rebuilding is to charge only small amounts you can afford to repay immediately, then pay in full by the due date. Doing so lets you build a positive payment history and low utilization without ever paying the steep interest. Treating the card as a payment tool rather than a borrowing tool keeps the high rate from ever touching you while you rebuild.
Setting Realistic Approval Expectations
Approval for a card marketed to people with bad credit is more likely than for a standard rewards card, but it is never certain, and it depends on the full picture in your application. Issuers still review your credit reports, your income, and sometimes your existing debts. Because a hard inquiry can ding your score slightly, it is worth applying only for cards where you have a realistic chance rather than submitting many applications at once.
Prequalification tools, offered by many issuers, let you check your likely odds with only a soft inquiry that does not affect your score. Using these before you formally apply helps you avoid unnecessary hard pulls and denials. If you are declined, the issuer must tell you the main reasons, and those reasons are a useful roadmap for what to improve before trying again.
Advertiser disclosure: general information only, not financial advice. Confirm current terms on the issuer's official site before applying.