Best $500 Credit Cards For Those With A Bad Credit Score

It can be tough to find a good $500 limit credit card if you have a bad credit score, but it’s still possible. This type of credit card is usually the best choice for those with lower credit scores who can’t get approved for a higher credit line. A low-limit credit card can be a great way to build your credit without having to worry about overspending, especially if you want to avoid the temptation of a high credit limit.

Wondering which card is best for your credit-building goals? We’ve uncovered the best credit cards to start your search.

3. Discover it® Secured Credit Card

The Discover it^® Secured Credit Card is another with no annual fee and cash back rewards. It's a great fit for those who spend regularly at gas stations and restaurants as you’ll earn 2% cash back (any amount above $1,000 each quarter will earn 1%). Discover also matches the cash back you earn each year. For example, if you earn $100 worth of cash back, Discover will match that so you’ll earn $200 in total. There are no minimum credit requirements, but you may need to meet any income requirements set by Discover.

4. Self Visa^® Secured Card

The Self Visa^® Secured Card is a great option for those looking to save and build their credit at the same time. While there is a one-time fee of $9 to set up the account and $25 annual fee, you don’t have to put down a large security deposit. You start with a $100 security deposit, and you can increase it as you keep saving. You will need to meet income and other financial requirements to keep your account in good standing. These include making at least three on-time monthly payments, having a least $100 in savings, and updating your income information. Keep in mind that this isn’t like a conventional credit card — the money you pay goes towards a credit builder loan (you will have access to the principal you paid). If you’re not interested in using a credit card for purchases, then using this card to build your credit can be a great choice.

5. Capital One Platinum Secured Credit Card

Although you don’t get any rewards with this Capital One Credit Card, you do get the advantage of low security deposits and no annual fees. Those who want to travel can take advantage of the fact that there are no foreign transaction fees and $0 fraud liability in case there are unauthorized transactions. If you are responsible with your credit behavior, Capital One may return your security deposit back as a statement credit. Watch out for the APR — although it’s on par with what many of the other credit card companies on our list offer, it’s on the high side. If you plan on carrying a balance, make sure you’re aware of how much interest you could be paying.

How To Compare $500 Credit Cards For Bad Credit

As with any important financial move, be sure to read the fine print and consider all the pros and cons before making a decision. Some factors to consider when comparing different $500 limit credit cards include security deposits for secured credit cards, fees, and any rewards and benefits.

Credit Score Requirements

While there are different credit scoring models like FICO^® and VantageScore^®, in most cases a bad credit score is anywhere between 500 and 600. There are many options that offer credit cards to consumers in this credit range. Some credit card issuers may extend credit to those with no to low credit history, though these companies may be rare. That’s why it’s important to check to see whether you can meet the minimum credit score — $500 credit limit or not — before submitting an application.

Security Deposit

The main difference between a secured and unsecured credit card is the security deposit. An unsecured card is “secured” by a cardholder’s signature (or their good credit) whereas you will need to put up a refundable security deposit for a secured card. In most cases, the amount you put down acts as your credit line.

Fees And Interest Rates

A card’s annual percentage rate (APR) is the interest rate; if you carry a balance month to month on your card, you will also accrue interest at the specified APR. APRs can be high for credit cards, especially ones for those with bad credit. If you plan on carrying a balance on your credit card, it’s crucial you compare the APRs when shopping around. In most cases, the APR you’re offered is variable — it can fluctuate depending on different factors like the economy and market conditions. A high APR could go even higher, so be mindful whether it’s worth it to sign up for the credit card you want. 

Rewards And Benefits

Getting credit card perks can come in numerous forms, including cash back and points towards travel and merchandise. However, not all low limit credit cards offer these perks. Yes, credit cards can be a great tool to build credit history, but it’s more important to look at other factors such as annual fees, interest, and credit score requirements. Besides, any interest charges you have if carrying a balance could negate the benefit of any rewards earnings you may receive.

Credit Limit

While it may not be clear on a credit card issuer’s website, try to make sure you can get a $500 limit on the credit card before taking the time to apply. Some issuers advertise a minimum credit limit or security deposit — even if it’s lower than $500, you may still have the opportunity to increase your security deposit. You can call customer service or if you feel comfortable, ask any friends or family members who may have the same card.

Improving Your Credit Score With A $500 Credit Card

When used responsibly, a credit card can be a useful financial tool. Using the following best practices, you can work towards improving your credit score and potentially enjoy a wider range of borrowing options in the future. Note that while credit score improvement won’t be instantaneous, these steps can still help if you’re willing to be consistent with them.

Make Payments On Time

The most important rule of responsible credit card usage is to make your monthly payments on time each month, and in full if you can. Remember that payment history is the most important part of your credit score, and late payments can seriously hurt your credit.

Why pay in full? When you pay the full balance each month, you won't have to pay interest on that money. If you aren't able to pay in full every month, be aware of the minimum payment. When you only pay the minimum payment each month, you’ll be charged interest on your remaining balance based on your card’s APR .

Monitor Credit Utilization

Your credit utilization is the percentage of your credit limit you are using. For example, if you have a credit limit of $1,000 and a credit card balance of $500, your utilization ratio is 50%. The higher the credit utilization, the more it seems you need to rely on credit to get by. As such, lenders may be wary of offering you more credit or your credit score could be negatively affected. In general, it’s best to keep your credit utilization at or under 30%.

Use The Card

Using a credit card on at least a somewhat regular basis and paying off the card balance by the end of each billing cycle are key to improving your credit score. That’s because having regular credit activity means that the card issuer will regularly report your behavior to the credit bureaus. Keep in mind that if you miss payments or have a high credit utilization ratio, card issuers will report that as well.

The Bottom Line

There are options for getting a $500 limit credit card even if you have a low credit score. Before applying for one, make sure you do your research to make sure the card is the best fit. Once you’re approved, try your best to form positive habits like paying on time and regularly checking your purchases to help you boost your credit score over time.

You can take an important step in your credit building journey by downloading the Rocket Money℠ app and monitoring your credit score for free.