Credit Tip Tuesday #24 - How to Get a Credit Card with Bad Credit

If you’re struggling with your finances, it can often feel as though there is no way out. Whether it be finding ways to pay off your debt, worrying about personal savings or getting denied for new lines of credit, dealing with bad credit can be a difficult task. At Plastk we want to encourage conversations about personal financial education. We understand that credit education is a tool you can use to achieve your goals.

No matter what your financial situation, getting approved for a credit card is not exclusive to those with perfect credit. If you have bad credit, getting access to a secured credit card can be your ‘way out,’ of many of your financial burdens. Learning how to use a credit card is an essential skill on your path towards financial freedom. Whether your goal is to buy your first home, pay off student loans or debt or just to improve your relationship with your personal finances, Plastk is here to help you. 

So how do you get a credit card with bad credit? 

If you have bad credit, you’ll likely need to get a secured credit card. These are perfect for those with bad credit as they offer easy or guaranteed approval, give users the opportunity to set their own limit, have an easier application process and many more benefits that would be appealing to those with bad credit. 

It is important to remember that secured credit cards are exactly like traditional credit cards. The main difference is that secured credit cards require security deposits to determine your credit limit. These cards also rarely require credit checks to get approved and allow users to set their own limit. 

How do you start on the path towards good credit?

Step One: Acknowledge your situation and understand it’s not permanent. 

It’s easy to fall into a rut, if you are struggling with your financial situation. Many people with bad credit, begin to feel hopeless or as though their choice do not matter. However, developing positive mindsets towards your finances is the best way to start on the path towards improving them. While it may be stressful to face your problems head on, once you start learning about mistakes you’ve made with your credit history, it will be easier to start on the right path.

Step Two: Research Various Credit Cards

Now that you’ve read the credit tip Tuesday blogs about the financial areas you are working on, you can start working towards finding a secured credit card that works best for you! Every credit card offers different benefits and general features. For example, some credit cards with higher fees offer rewards programs or cashback that make these costs good investments. 

Key Questions to Ask when Applying?

• Does the card I am applying for offer rewards or cash back?

• What is this card’s APR %? 

• Are there any annual fees? 

• What credit limit do I qualify for? 

• Are there any other benefits to using this card?

Step Three: How a secured credit card can help

The main differences between secured and unsecured credit cards is that secured cards require you to make an upfront payment, called a security deposit, this deposit amount will become the limit of your credit card. 

Secured credit cards offer six main benefits that offer individuals with bad credit easy access to lines of credit and simple tools they can use to grow their personal wealth.

• Easy or guaranteed approval

• Can help to build your credit score

• Reports to a credit bureau 

• Accepted everywhere

• Easy to apply
• Ability to set your own limit 

One of the best features of owning a secured credit card is that they often offer easy or guaranteed approval. This means you will get approved regardless of credit history. One of the biggest hurdles those with bad credit face, is getting approval. Secured credit cards remove this barrier so anyone who wishes to have a credit card is able to have access to one. With Plastk Secured Credit Card, once you fill out your online application and send your security deposit, you will have access to your credit card! 

Using your secured credit card regularly and paying off the balance in full is the easiest way to start building or improving your credit score. While improving your credit score won’t happen overnight, using your secured credit card in a responsible manner, can help put you on track towards improving your credit history. 

Step Four: Increasing your utilization rate 

Your credit utilization is one of the key factors in determining your credit score. Secured credit cards are perfect for increasing your utilization rate because you can easily increase your limit. While many unsecured credit cards require a specific credit score, income or debt to asset ratio to determine your credit score, secured credit cards determine your limit based on your deposit. 

This means that if your starting limit is $500 and you’re looking to increase your limit to reduce your utilization or increase your credit limit, you can easily do so. Plastk Secured Credit Card offers limit flexibility for all our users. This means that you can increase your limit at any time. 

For example: If you have a goal of having a credit limit of $1,500 but only have $500 when you first apply, you can slowly work towards getting the limit you are aspiring to have. At Plastk we offer credit limits of $300-$10,000. This means, regardless of your income, we have the ability to accommodate you. 

Starting with a moderately high credit limit is the best way to develop positive credit habits. If you can not manage your credit with $500, it is likely you will not be able to manage your credit if you have a $5,000 limit. Once you begin managing your credit with a smaller limit, you can start putting more funds towards increasing the limit you have. Before you know it, you will have a high credit limit and understand how to manage it like a pro! 

Step Five: Understand how your credit can work for you

Now that you’ve been approved for a secured credit card, understand your financial situation and have a savings account of funds you can use to increase your credit limit, you can learn how your credit card can work for you. As we mentioned in step three, various credit cards offer different benefits. Once you understand this, you will understand how you can use your card’s benefits to grow your wealth. 

If your card offers cash back or rewards, you can use these benefits as benchmarks for your goals and help you in difficult situations. For example, if you want an Apple Watch or another big-ticket-item, you can check to see if your card offers a rewards program that offers premium rewards. Many credit card companies offer rewards hubs for their members, where you can trade in cardholder points for name brand items. Other cards offer cash rewards that you can use to pay off your balance.

This means that your card, in a way, pays you to shop. It allows you to have extra coverage, in the instance that you do not have enough money in your account to pay off your balance. While we do not recommend spending more on your credit card than you can afford, rewards cash can help support you in case this happens. You can also use these cash-back points to pay off your card balance, to save money. 

Another way your credit card can work for you is in the way in which you can grow your credit history. Without credit history you will not be able to buy or lease a car, own a home or have access to many of life’s most important milestones. Using your credit card to help you save towards life's big purchases is one of the best ways you can use your card and learn from it. 

How to Apply

Applying for a secured credit card is easy. All it takes is three simple steps and you will be on your way towards financial freedom. 

• Step One: Fill Out Your Application
• Step Two: Send in Your Security Deposit
• Step Three: Start Using Your Secured Credit Card!

Disclaimer: The content provided on the Plastk Financial Inc. Blog is information to help Canadians become financially literate and learn about credit. Plastk is not responsible for building or ruining an individual's credit score or credit rating. It is neither tax nor legal advice, is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. Tax, investment, credit inquiries, and all other decisions should be made, as appropriate, only with guidance from a qualified professional.