Credit Cards (US)

What are credit-building and bad credit credit cards?

Are you looking for ways to build up your credit score without taking on huge debts? If so, read on to learn about credit building and bad credit cards!

Find out what are credit-building and bad credit cards!

See how you can improve your credit history with a credit card. Source: Canva.
See how you can improve your credit history with a credit card. Source: Canva.

Are you looking to build up your credit and don’t know where to start? Credit-building cards and bad credit credit cards are two of the best options out there.

Also, both can help you establish a positive payment history, which is the core factor of your overall credit score.

Moreover as such, you must understand what these two types of cards are and how they differ so that you can choose one according to your needs.

How to get accepted for a credit card

How to get accepted for a credit card?

Are you looking to get accepted for a credit card but unsure where to begin? If so, you can read on to find out!

Therefore, In this blog post, we’ll go over everything from what makes them different to their pros and cons, as well as ideas for which card might be right for you!

So, read on for more information about making the most out of your financial future with these helpful tools at hand!

How do credit cards work?

Using a credit card to make purchases is a time-saving convenience. But the credit card company will cover the cost of your purchases and bill you regularly. If you pay the balance in full, no more interest will be added.

If you don’t pay more than the minimum each month, interest will be added to your balance (unless you’re taking advantage of an introductory 0% APR offer).

What is a credit-building credit card?

A credit-building card is perfect for people with less-than-perfect credit scores. Source: Canva.
A credit-building card is perfect for people with less-than-perfect credit scores. Source: Canva.

A credit-building card is designed to help those who are just starting out or have a limited credit history, similar to bad credit cards.

Also, this type of card is an option to consider if you need credit but have a poor or nonexistent credit score is a credit builder card.

Therefore, these cards are designed to help you build credit so you may qualify for more favorable interest rates and conditions on future credit purchases.

However, if you want to see your credit score rise, you need to be responsible with your card.

Pros

With a credit card, you can easily keep track of your monthly expenses.

Also, responsible credit card use includes making payments on time and using only a small portion of available credit.

Moreover, they’re often part of a compensation package. So, credit cards with bonuses like cash back and frequent flyer miles are more likely to be issued to applicants with higher credit scores.

Cons

Credit cards may help you build credit and teach you how to handle plastic responsibly.

However, credit card misuse might have the opposite impact and damage your score.

Also, if you know you’ll be tempted to spend all of your available credit, getting a credit card for the sole purpose of raising your credit score is a bad idea.

Moreover, the likelihood of acceptance is low. If you have never had a credit card or if your credit history is patchy, it may be difficult, if not impossible, to acquire one.

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What is a bad credit credit card?

If you have a terrible credit history but still need access to credit, you can apply for a credit card.

Also, you may build credit with responsible usage of these cards and on-time monthly payments.

Therefore, obtaining a credit card for those with negative credit might be a great way to start rebuilding credit.

Moreover, a negative credit card is no different from any other credit card in that it has a spending limit.

Also, you need to pay special attention to the APR (annual percentage rate).

So, the APR is the interest rate the credit card companies will charge for borrowing money on credit for a year. This can happen if you don’t pay off your credit card balance in full each month.

In addition, carrying a balance from month to month on a credit card for those with bad credit might be more expensive than on a credit card for people with excellent credit.

Therefore, this is a visual representation of the greater risk a lender takes on when extending loans to a consumer with a low credit score.

So, like any credit card, you’ll need to pay your amount in full at the end of each month.

Pros

A bad credit credit card can help you build credit if you use it responsibly. Moreover, you may be able to earn more rewards than with credit-building cards.

Also, you can get some types of protection, such as $0 fraud liability, depending on the credit card type.

In addition, it can be a lot easier to get approval for a credit card for a bad credit score.

Cons

You may not be able to pay the high fees that may come with this type of credit card. Moreover, you’ll need to pay interest because you’ll need to carry a balance each month.

In addition, if you overspend, you’ll need to make high fees payments if you don’t make your monthly payments on time.

If you carry a large load, make payments late, or utilize a lot of your available credit, it might negatively affect your credit score.

Therefore, keep in mind that your credit score may momentarily drop after applying for credit. However, your credit score will improve if you maintain it.

Tips for using credit-builder cards and cards for bad credit!

Use these credit cards the right way to build up your credit score! Source: Canva.
Use these credit cards the right way to build up your credit score! Source: Canva.

Now that you’ve learned more about these types of credit cards, you can learn some tips on how to use them wisely!

  • Avoid paying your credit card bill late. This way, you won’t need to pay a late payment fee and reduce your available credit;
  • Make consistent payments and pay off credit cards in full every month. This way, you’ll avoid adding to your debt and interest costs;
  • Make at least the minimum payment each month, even if you can’t pay it off completely.
  • Remember that your credit score might take a serious hit if you skip a payment;
  • Direct debits might help you make your monthly payments on time;
  • Sign up for SMS or email notifications from your bank to ensure you never miss a payment again.

Also, these are just a few tips to help you make better use of your credit cards.

Moreover, you’ll be able to build your credit score! Therefore, you’ll be able to use these cards to improve your finances overall and live a better life!

On the following link, you’ll find a list of the best credit cards to help you start improving your credit score today!

credit building loans

Best cards for building credit scores fast

Check out the 8 best credit cards for building credit scores fast and start improving your score today.

About the author  /  Victória Lourenço

Victória Lourenço is part of the finance writer team for The Mister Finance website. She is a translator and copywriter, having worked on finance topics for over four years. She has a goal to keep studying finances to help people learn more about how to use their credit cards, make loans, and use other money-related products in a way that they can find a more meaningful and healthy financial life!

Reviewed by  /  Aline Barbosa

Senior Editor

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