Best Credit Cards for Bad Credit in May 2024

Best Credit Cards for Bad Credit in May 2024

How Credit Card Rewards Work

Now that I've explained the types of credit card rewards that are available, let's talk more about how they work.

Types of Rewards

Rewards credit cards allow you to earn points, miles or cash back for every dollar you spend. Whether your card's rewards are labeled as points, miles or cash back doesn't necessarily determine how you can redeem them.

You may be able to redeem for travel, cash back, merchandise or other options, depending on your card. Rewards cards can be an excellent way to earn on your spending, as long as you don't carry a balance.

Every credit card issuer determines the rewards rate for each credit card it offers. Here are some examples of rewards rate structures.


How to Apply for a Credit Card

Before you start the application, you need to have access to a few things. Be ready to report your gross annual income for the application. Credit card issuers need to know your income so they can determine if you can repay any debt you accumulate. Your income is also a factor when the issuer is setting a credit limit.

And be sure you're applying for a card that's in line with your credit score. You can find free scores in multiple places, such as on your credit card statement or from your bank. Also have your personal information handy, including your Social Security number. Got everything? OK, you're ready to start the application.

Here are the four basic steps of applying for a credit card online:

1.Fill out the application. You'll be asked for your name, Social Security number, birthday, home address, email address and other identifying information. Also, you'll need to list your employer and annual income. This information helps the issuer determine whether you have enough income and job stability to pay off balances you incur with the credit card.

2.The issuer will review your credit report and credit score. Along with your application, your credit report gives the issuer an overview of your payment history, current accounts and debt, plus any negative items that pop up, such as a delinquent account. Your credit score also reflects your creditworthiness and is another tool used to determine whether your application should be approved.

3.Wait for a response to your application. If approved, you'll receive your new credit card within about 10 business days. When you get the card, you can activate it by going online or calling the provided number.

4.What to do if your application is denied. If denied, you will receive an adverse action letter stating the reason. You could be denied credit for many reasons. For example, you might have too many inquiries on your credit report, a credit score that's too low or insufficient income.

Use the adverse action letter as a blueprint for improving your credit. But if you feel that you'd like to discuss the matter, call the issuer's reconsideration line. This number is often contained in the adverse action letter. If not, call the customer service number and ask to be connected with the credit card reconsideration department. Before you call, prepare to address the issues raised in the letter.

Types of Credit Cards

I know it can feel overwhelming when you're trying to select a credit card. There's such a wide range of choices out there. I want to make it easy for you, so here's a quick breakdown of the different types of credit cards.

Student Credit Cards

If you're a college student looking for your first credit card, a student card can be a good choice. Many student cards offer benefits such as cash back rewards, incentives for good grades and free credit scores. According to the Credit CARD Act of 2009, cardholders must be at least 21 years old or show proof of adequate income.

Cash Back Credit Cards

If you want to save on everyday expenses, a cash back credit card might be the card for you. You can earn rewards on a range of categories. Some cash back cards offer a flat rate on all purchases, but some have a different rewards rate on specific categories. For example, you might get 3% cash back on grocery purchases, 2% back at gas stations and 1% back on other types of spending. And there are a few cash back cards that have rotating categories that change every quarter.

High-Limit Credit Cards

If you have good credit, you might qualify for a credit card with a high credit limit. With these cards, you can earn rewards on high-priced items. For instance, let's say you need a new refrigerator. You could make the purchase with a high-limit credit card and earn lots of rewards. But this only works if you pay the balance in full by the due date. So you need to practice discipline and good money management skills to use these cards successfully.

Starter Cards for Building Credit

You can build a solid credit history – and credit score – by using credit cards responsibly. Whether you're new to credit or you're rebuilding your credit, here are some credit cards that can help you.

Secured credit cards. Secured cards offer you a chance to establish a good credit score or even fix a bad one. You do have to put down a deposit, but if you use the card responsibly, you'll get your deposit back when you're ready to get an unsecured card.

Student credit cards. If you're a student, this can be a good start to building credit. You do have to show proof that you have an income if you're younger than 21 in order to apply for a student credit card.

Cards for bad credit. The FICO score range for poor credit is 300 to 579. There are good cards in this category if you're rebuilding your credit, but always read the terms carefully and look for fees.

Cards for fair credit. The FICO score range for fair credit is 580 to 669. Once you enter the land of fair FICO scores, you get better credit card options.