Credit cards for bad credit are specifically designed for individuals with poor or limited credit histories.
These credit cards can be a helpful tool for rebuilding credit and improving your financial standing.
While they often come with lower interest rates and fees compared to traditional credit cards, they provide an opportunity to demonstrate responsible credit behaviour and gradually improve your credit score over time.
Here are some types of credit cards for people with low credit scores:
Secured Credit Cards:
Secured credit cards require a security deposit (Fixed Deposit) as collateral.
The credit limit is usually equal to or slightly higher than the deposit amount.
These cards are a common choice for individuals with low credit scores as they provide a way to access credit while minimizing risk for the lender.
Making consistent on-time payments and keeping your credit utilization low can help improve your credit score.
Subprime Credit Cards:
Subprime credit cards are specifically targeted at individuals with lower credit scores.
They often come with higher interest rates and fees, but they can be a stepping stone to better credit if managed responsibly.
These cards may offer limited rewards or benefits compared to prime credit cards.
Prepaid Debit Cards:
Prepaid debit cards are not technically credit cards, but they can be used for similar purposes. You load funds onto the card, and you can use it for purchases.
However, since they are not credit-based, they don’t contribute to your credit history or score.
Credit Builder Cards:
Some financial institutions offer credit builder cards that are specifically designed to help you improve your credit score.
These cards often have lower credit limits and may require you to complete credit education courses as part of the application process Example Yes Bank Finbooster Credit Card.
Retail Store Cards:
Some retail stores offer credit cards that are easier to qualify for.
While these cards may have limited use outside of the specific store, they can be a way to establish credit if managed responsibly example Bajaj Circle EMI Card.
When considering credit cards for low credit, here are a few things to keep in mind:
Interest Rates and Fees: Be aware of the interest rates and fees associated with the card.
They are often higher for bad credit cards, so it’s important to understand the cost of using the card.
Credit Limit: Secured credit cards will have a credit limit equal to or lower than your security deposit.
Subprime cards may have higher credit limits, but they still tend to be lower compared to prime cards.
Reporting to Credit Bureaus: Ensure that the card issuer reports your payment history to the major credit bureaus. This is crucial for rebuilding your credit.
Responsible Usage: The primary goal of using these cards is to demonstrate responsible credit behaviour.
Make on-time payments and keep your credit utilization low to see improvement in your credit score.
Upgrade Options: Some secured credit cards offer the possibility of upgrading to an unsecured card after a certain period of responsible usage. This can provide better terms and benefits.
Before applying for any credit card, it’s important to research your options, read the terms and conditions carefully, and consider seeking advice from financial professionals if needed.
Responsible credit management is key to improving your credit score and overall financial health.
Best Credit Cards for Bad Credit
In the modern financial landscape, credit cards have become essential tools for making transactions and managing personal finances.
However, individuals with bad credit often face challenges when trying to secure credit cards due to their credit history.
Fortunately, secured credit cards offer a viable solution for those looking to rebuild their credit score and gain access to the benefits of credit card usage.
This article shares details about credit cards for low credit, highlighting the concept of secured credit cards and discussing some of the best options available in India.
What are Secured Credit Cards?
A secured credit card is designed to help individuals with poor or limited credit history build or rebuild their credit scores.
Unlike traditional unsecured credit cards, which are granted based on a good credit history, secured credit cards require a security deposit as collateral.
This deposit acts as a safety net for the lender in case the cardholder defaults on payments.
Secured credit cards often have lower credit limits and may come with higher interest rates and fees, but they offer an opportunity to demonstrate responsible credit behaviour and improve creditworthiness over time.
Benefits of Secured Credit Cards:
Credit Building: Secured credit cards provide a chance to rebuild or establish a positive credit history.
Consistently making on-time payments and managing the card responsibly can lead to an improved credit score.
Access to Credit: Individuals who are struggling to qualify for unsecured credit cards due to bad credit can still access credit through secured credit cards.
Financial Discipline: Using a secured credit card encourages responsible spending habits and budgeting skills, as the cardholder must manage their available credit wisely.
Online Transactions: Secured credit cards enable online transactions, making it convenient for cardholders to shop, pay bills, and make reservations.
Best Secured Credit Cards in India:
SBI Unnati Credit Card:
Minimum Security Deposit: ₹25,000
Features: No annual fee for the first four years, fuel surcharge waiver, and cash withdrawal facility.
ICICI Bank Secured Instant Platinum Credit Card:
Minimum Security Deposit: ₹20,000
Features: Quick application process, low annual fee, and flexible credit limit.
Axis Bank Insta Easy Credit Card:
Minimum Security Deposit: ₹20,000
Features: No income documents required, low annual fee, and customizable credit limit.
Kotak Mahindra Bank Aqua Gold Credit Card:
Minimum Security Deposit: ₹10,000
Features: Flexible credit limit, option to convert purchases into EMIs, and add-on card facility.
IndusInd Bank Secured Credit Card:
Minimum Security Deposit: ₹25,000
Features: Low annual fee, attractive rewards program, and easy documentation process.
IDFC First Wow
Minimum Security Deposit: ₹5,000
Features: Zero annual fee, attractive rewards program, and easy documentation process and approval.
Application Process for Secured Credit Cards:
Research: Compare different secured credit card options available in India, considering factors such as interest rates, fees, and features.
Eligibility: Check the eligibility criteria, which usually involve a minimum age, income requirement, and valid identification documents.
Security Deposit: Determine the required security deposit for the chosen secured credit card.
Application: Visit the bank’s website or branch and fill out the application form. Provide necessary documents, including identity proof, address proof, and proof of income.
Security Deposit: Make the security deposit through cheque, demand draft, or online transfer as specified by the bank.
Approval: The bank will review your application and security deposit. Once approved, you will receive the secured credit card.
Remember Secured credit cards provide individuals with bad credit the opportunity to rebuild their credit history while enjoying the benefits of credit card usage.
When considering a secured credit card, it’s important to choose a card that aligns with your financial goals and offers reasonable terms and conditions.
By responsibly managing a secured credit card, you can gradually improve your credit score and pave the way for future financial opportunities.
