Finding a No-Fee Credit Card for Limited Credit

Tuesday, December 10th, 2013
Updated: December 10th, 2013
The content is accurate at the time of publication and is subject to change.

People with poor credit often do not know where to begin when they are looking for a credit card. They may think that their choices are as limited as their credit and that they will have to pay high fees for any credit card available to customers whose credit has taken a beating. But this is not true. There are a few simple rules to finding a great, no-fee credit card—no matter what your credit score looks like.

Rule #1: Don’t automatically go for a secured credit card. There are certain circumstances when applying for a secured card is the best option, but just because you have limited credit, don’t assume you can’t get an unsecured credit card. Secured credit cards often come with fees for activation, monthly fees, penalty fees and more. In addition to those, you’ll need to put down a deposit equal to the amount of credit you want on the card. That makes a secured card an expensive option right up front. Before you look at secured cards, consider other types of credit cards for limited credit.

Rule #2: Look for a card with no annual fee. This is easy to find if you pay attention to the terms and conditions of each card you are considering. In fact, many cards with annual fees are for customers with great credit and high credit limits. These annual fee reward cards, like the American Express Black card, can have annual fees upwards of $400. But some credit cards for bad credit will try to sneak an annual fee past you too. One way they do this is by calling the annual fee a “monthly fee.” That $5 monthly charge adds up to a $60 annual fee, so don’t apply for a card that comes with a monthly or an annual fee—no matter what they call it.

Rule #3: Don’t rule out rewards. Many people think that rewards cards are only for people with good or excellent credit. But more and more credit cards for poor credit are offering customers rewards like cash back, special discounts and exclusive member benefits. Just because you have bad credit, it doesn’t mean you can’t get rewarded for using your credit card. A good credit card for people with limited credit will have some type of loyalty or incentive program—and there will not be a fee to join it.

The Bottom Line

When you are looking for that perfect credit card to start building your credit back up, don’t forget that the card must report to at least one major credit bureau in order to help improve your credit score. The best credit card for someone whose credit needs some TLC is a card that doesn’t carry any fees, reports to credit bureaus, and gives rewards of some type to cardholders.

All rates and fees, and other terms and conditions of the products mentioned in this article/post are actual as of the last update date but are subject to change. See the current products' Terms & Conditions on the issuing banks' websites.

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