If you have poor credit and are seeking to improve it, you may benefit from getting a bad credit credit card. They’re easy to qualify for even if you’ve made some mistakes in the past, and with consistent, responsible usage, you can gradually boost your credit score. Despite these perks, however, this type of card isn’t going to save you money.
Why credit cards for poor credit won’t save you money
If you’re looking to save some dough, you won’t have any luck with a credit card for bad credit. Because people who qualify for these cards don’t have good credit, they are considered riskier and are given a higher interest rate. Your interest rate may be 20% or even higher, so if you ever carry a balance on your card — meaning you don’t pay your balance in full each month — you will end up spending a lot of money on interest.
Accordingly, this type of credit card can actually cost you more money than lower-interest credit cards if you ever carry a large balance. The best way to avoid this unnecessary expense is to never charge more on your credit card than you can reasonably pay off in the next month or two. If you don’t carry a balance, you won’t spend money on interest payments, but you also won’t necessarily save money. You’ll just have a brief, free loan as you would with any credit card.
What a credit card for bad credit can do for you
While this type of credit card can’t save you money, it can help you build or improve your credit if it’s lacking. Why should you care? A bad credit score can make it difficult to qualify for loans, get favorable rates on insurance or even get a lease approved for an apartment.
The best way to boost that score is to show you can use a credit card responsibly. Qualifying for a credit card for poor credit and making smart moves such as keeping your credit card balance low and paying every bill on time will help increase your credit score. Before you know it, you’ll be able to qualify for a card with a better interest rate and possibly even bells and whistles like a rewards program.
An extra perk: Unlike debit cards, credit cards offer zero liability on unauthorized purchases made if your card is lost or stolen. This extra level of protection you get with credit cards is especially valuable with an increasing number of data breaches.
Bad credit illustration via Shutterstock.
The post Will a Bad Credit Credit Card Save Me Money? appeared first on NerdWallet Credit Card Blog.
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