If you think your crummy credit score means you won’t be approved for a rewards credit card, think again.
You should temper your expectations, of course. No issuer is going to give you a 50,000-mile sign-up bonus if your credit is bad. However, the days of rewards being available only to those with sparkling FICO scores are in the past.
The fact that credit card issuers are offering up rewards to entice folks with poor credit is further proof of the hyper-competitiveness of today’s credit card business. Americans are spending on their cards again, while delinquencies and bankruptcies are still low. That makes banks eager to lend you money, whether you’ve got a perfect FICO score or a less-than-perfect one.
Now, to be sure, you shouldn’t take a credit card — for rewards or any other reason — just because it is being offered to you. Before you apply, take a moment to think about how you ended up with bad credit in the first place.
— Did a temporary setback, such as job loss or a medical emergency, take a major toll?
— Do you have difficulty getting organized and paying bills on time?
— Are you simply someone who can’t resist the lure of available credit?
— Do you only pay the minimum payment or a little bit more each month rather than striving to pay your balance in full?
That’s hardly an exhaustive list. There are as many possible reasons for credit woes as there are grains of sand on the beach, but the last bullet above might be the most important behavior to recognize when applying for a rewards card. If you can’t pay your balance in full each month, the math just doesn’t work when it comes to rewards. It doesn’t take an accountant to understand that paying a 23 percent APR to get 5 percent cash back is a bad deal.
The good news, however, is that if you commit to handling your credit well, you can actually make credit cards work for you, even as you rebuild your credit.
Here are a few rewards cards aimed at folks with fair or worse credit.
Discover It Secured Card. Because this is a secured card, you’re required to make a deposit in order to receive the card. That deposit sets the amount of your credit line. (Deposit $250 to get a $250 credit line. Deposit $500 to get a $500 credit line.) Beyond that, however, secured cards work like regular credit cards and can help you improve your credit history if you pay your bills on time and keep your balances low. This card also has no annual fee.
When it comes to rewards, the card offers 2 percent cash back on restaurants and gas stations up to $1,000 in purchases each quarter, and 1 percent back on everything else. And, as Discover is offering with many of its cards, the issuer will double all of your cash back at the end of the first year.
Remember, however, that the card comes with a 23.24 percent APR. That makes it imperative to pay your balances in full to avoid interest charges. Otherwise, that interest will swallow up those rewards in a hurry.
SunTrust Secured Credit Card With Cash Rewards. Like the Discover card, this one requires a deposit upon approval, with your card’s credit limit determined by the amount of the deposit. The card offers 2 percent cash back on gas and groceries on up to $6,000 in purchases annually. It comes with a $32 annual fee — which is lower than you’ll find for most annual-fee cards but can still eat into your rewards profit — but features a lower APR than the Discover card: 20.24 percent.
Also, while SunTrust won’t double your cash back after the first year, it will give you a bonus based on the type of deposit account you redeem your cash back into. (Those with a standard SunTrust checking or savings account will get a bonus of 10 percent.)
Capital One QuicksilverOne Cash Rewards Credit Card. This card is meant for folks with fair credit, but unlike the others on this list, it is not a secured card. There’s no deposit necessary to get this one.
QuicksilverOne comes with an annual fee of $39 and a higher-than-average APR of 23.24, making it comparable to the other two cards on the list. However, it also comes with an introductory offer of 0 percent interest on both purchases and balance transfers until November 2016. In addition, there’s no extra fee for transferring a balance. (Many balance transfer cards, including the Discover It Secured Card, charge a one-time fee of 3 percent or more per balance transfer transaction.) That means that those with credit card debt have the potential to save themselves a significant amount of interest if they play their cards right.
The QuicksilverOne card offers 1.5 percent cash back on everything you buy. There are no rotating categories, no limits on what you can earn and the rewards never expire.
The Bottom Line
If you’re prone to carrying a balance, these cards probably aren’t for you. The interest you’d pay due to these high APRs would outweigh any rewards you’d receive in a big hurry. However, if you take care of business — paying your bills on time, every time, and keeping your balances very low — you can take advantage of the rewards these cards have to offer.
More from U.S. News
11 Ways to Save Time and Money
12 Ways to Be a More Mindful Spender
10 Money Leaks to Shut Down Now
3 Rewards Credit Cards You Can Get With Fair to Bad Credit originally appeared on usnews.com
