Subprime Credit Cards for Consumers with Poor Credit

Subprime credit cards are designed for subprime borrowers -- that is, consumers who have had some difficulty in the credit department and may be considered “high risk” by potential creditors. Often such borrowers can obtain new credit only if it comes with high interest rates attached and less than favorable terms and conditions. If you have poor credit and are in need of a credit card, where should you turn?

Subprime credit card lenders hope that you will turn to them. They are in the sole business of offering credit cards to “risky” borrowers. In fact, such lenders even have been known send credit card offers to consumers who have just gone through with bankruptcy. Obviously, there must be something in it for these lenders to provide credit to individuals who have not dealt with credit very well in the past; but before we get into that, what can consumers get out of subprime credit cards?

While it probably would not be wise for the consumer who cannot control his or her spending to obtain another form of credit after having used it poorly in the past, sometimes emergencies, medical bills, and other unexpected costs cause otherwise responsible people to get into credit trouble. The main benefit of obtaining a subprime credit card for such individuals is, simply, that they will be approved. Beyond this, the benefits largely are on the part of the lenders.

Subprime credit card agreements generally will offer borrowers very small limits, such as a few hundred dollars. While this may not seem like a bad deal since sometimes individuals need just a little bit of monetary help to get by, borrowers will not - in fact - have access to this total amount. Rather, a great deal of their credit limits will be consumed by various lenders’ fees, and the actual amount of credit available may be next to nothing.


For example, you can be certain that most subprime credit cards come with a hefty sign-up fee, so you immediately will owe money. You may be charged a fee per every $100 or so of credit available to you. If you wish to increase your credit limit, this will cost you as well. Monthly fees will be charged too. And all of these potential fees are if you have done everything correctly. If you are late on your payments, you may be charged a penalty that is as much as half of your available credit limit. This is all in addition to a very high interest rate.

For borrowers who find themselves in such a situation, they may be paying hundreds of dollars for the chance to borrow a very small amount of money at a frighteningly high interest rate. To be fair, however, some subprime credit cards definitely are more consumer-friendly and legitimate than others, but you must exercise much caution before deciding to sign up for one. Consider how and when a credit card offer was provided to you. Was it at an especially dire point? Does someone seem a bit too eager to lend to you given your credit history?

While there are exceptions to every rule, obtaining a secured credit card generally is a much better idea than signing up for a card that is offered specifically to subprime borrowers. Secured cards usually are offered by the same lenders that offer unsecured (“regular”) credit cards, such as banks. The only difference is that a secured card requires that you make a deposit before credit is extended to you. Thus, such cards generally are taken out by borrowers with poor credit, and additionally can help you to rebuild your credit.

If you have a poor credit history but need (and feel that you can handle) new credit, then subprime credit cards are an option but probably not your best choice. While they can provide a small amount of money to nearly anyone in a short period of time, all of the costs and fees associated with such cards rarely make them worth it.