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Can Overdraft Protection Save You From Overdraft Fees?

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You may be wondering if getting overdraft protection at your bank can help you to avoid overdraft fees. The answer is yes … and no. Overdraft protection is a service banks and credit unions provide to help customers avoid nonsufficient funds (NSF) fees they will incur if they don’t have enough cash in their account to cover a transaction. While some overdraft protection plans are free, others charge fees.

Pay a fee to avoid a fee? You may wonder, why bother? But depending on your situation, overdraft protection has the potential to help if you understand the plan terms.

What is overdraft protection?

If you write a check, visit an ATM to withdraw money, pay for a purchase with a debit card or have an automated payment post on your account and you don’t have sufficient funds, your bank could charge you an NSF fee.

If you have overdraft protection, however, your financial institution will automatically complete the transaction through a variety of methods, preventing you from incurring an NSF fee. However, they often charge an overdraft protection fee, which typically is a fixed amount that’s charged per overdraft item.

In 2010, a Federal Reserve-enacted rule regulating overdraft practices banned banks from enrolling customers in overdraft protection automatically. Now banks must allow customers to opt in to overdraft protection when they open an account, and you can opt out at any time.

How does overdraft protection work?

Banks typically offer three types of overdraft protection. With standard overdraft coverage, the bank covers the amount, generally charging a fee for each overdraft transaction.

You can also link your account to a line of credit. In this scenario, the bank will transfer funds to cover the overdrawn amount and any fees charged. The overdrawn amount is subject to a variable interest rate, and each overdraft might incur a separate fee.

Or you can link your checking account to a savings, money market, credit card or second checking account. With this option, your primary checking account draws funds from the linked account if you’re overdrawn. However, the transfer of funds might result in an overdraft protection fee.

What are overdraft fees and how much do they cost?

If you opt in to overdraft protection, your financial institution might charge a fee to cover an overdraft, although many cap the number of overdraft fees you can be charged per day. First there is the standard one-time overdraft protection plan, which is typically at least $34 per overdraft. An additional fee might apply if your account remains overdrawn for a certain length of time. The chart below provides information on standard fees for several banks.

Standard One-Time Overdraft Protection Fees for Banks
InstitutionOverdraft fee (per item) Maximum fees per day
Chase Bank$34$102
Bank of America$35$140
Wells Fargo$35$105
Citibank$34$136
US Bank$36$144

If you opt for an option other than the standard overdraft plan your bank offers, you may incur the following costs instead of those outlined in the table above:

  • Overdraft protection line of credit: Typically at least $10 per overdraft and an APR of around 20% charged on the covered amount.
  • Linked account overdraft protection: Typically $10-$12 per transfer. If you link a credit card account in this way, payments are considered to be cash advances. This means paying an APR of at least 26% on the overdraft amount, plus a fee that could be as much as 5% of the overdraft amount.

Some banks may offer special plans to protect you from overdrawing your account. For example, Wells Fargo has an overdraft rewind program that allows you to avoid an overdraft fee from some transactions that leave you with a negative checking account balance, as long as you make a direct deposit to make up the deficit by 9 a.m. the following day. This program is automatically applied to all checking accounts.

Pros and cons of overdraft protection

Pros

  • You can cover important purchases. If you’re in an emergency situation, overdraft protection can provide you with a way to pay for important purchases. This could be helpful if you currently don’t have enough money in your account and are near your next payday, and you need to make an immediate purchase and have no other means of payment, such as credit cards.
  • You avoid embarrassment. You don’t have to worry that your debit card will be declined during purchase checkout, which can be awkward, especially if you don’t have another form of payment handy.
  • You avoid bounced checks. Nonsufficient funds can result in your check being returned to the payee. In some cases, you may incur fees from the payee as well, who may be charged by their financial institution, too.
  • You won’t incur expensive late fees. If you can’t pay your rent or car payment on time, your landlord or lender may impose late fees. In some cases, they could be more than an overdraft fee, but overdraft protection could allow you to make your payment on time.

Cons

  • Fees can add up quickly. Overdraft protection fees can stack up fast when you’re shopping and don’t realize you’re overdrawing your checking account. You could hit the maximum fees per day without even knowing it.
  • You may become less attentive to your finances. People who live paycheck to paycheck or who have inconsistent income might be tempted to rely on overdraft protection to cover necessary purchases when they might not have the money.
  • You could overspend. If you aren’t good with budgeting, overdraft protection could become a crutch that tempts you to spend more than you have.
  • You can incur expensive interest charges. If your overdraft protection plan is linked to a credit card or line of credit, you can rack up interest charges on top of the fees your bank may charge.

Is overdraft protection right for you?

The key advantage of overdraft protection is that your transactions aren’t denied. So overdraft protection can give you peace of mind — but for a price. Replacing NSF fees with overdraft protection fees is a poor strategy if you have trouble keeping your checking account balance high enough to cover your expenses.

Alternatives to overdraft protection

  • Set up low-balance alerts. Many banks allow you to set alerts when your balance reaches a certain amount. This is a helpful feature that can make you aware when funds run low and when you should minimize spending.
  • Review your account balances. Regularly keep track of how much money is in your checking account. Log in to online banking or maintain a paper or electronic register to stay up-to-date on your account balance so you know how much you can afford to spend.
  • Choose a bank with no overdraft fees. Not every bank charges these fees. Here you can see a list of checking accounts that charge no overdraft fees.
  • Link your accounts for instant transfers. If you know you’re going to make a purchase and don’t have money in your account, you can have a savings account or money market account linked to your checking account to facilitate instant transfers. This way, you can cover a purchase without waiting for funds to clear. However, you should understand that you may have to pay fees for such a fast transfer of funds.

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Hanscom Federal Credit Union: Checking, Savings, CD, and Money Market Rates

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Hanscom Federal Credit Union’s checking account options

Free Kasasa Cash Checking

Kasasa Cash Checking is the credit union’s full-service, high-interest checking account.

APY

Minimum Balance Amount

1.00%
$0.01 to $15,000.00
0.10%
$15,000.01 and over
  • Minimum opening deposit: $1
  • Monthly account maintenance fee: $0
  • ATM fee: $0 for in-network ATMs
  • ATM fee refund: $20 per month
  • Overdraft fee: $30; free transfers if linked to savings account

The Free Kasasa Cash Checking account pays very high interest rates on balances of up to $15,000. However, certain qualifications must be met or that rate drops to effectively zero. All of the following qualifications must be met each month to earn the enhanced interest rate:

  • At least 1 direct/ACH deposit
  • 12 or more credit or debit purchases
  • Agreement to receive online statements

Balances above $15,000 receive a much-reduced interest rate, although still far above the non-qualifying rate.

Customers also enjoy a host of free services, including: online banking, bill pay and transfers; mobile banking with remote deposits; free online statements; a free debit card; and, unlimited check writing.

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NCUA Insured

Premier Checking

Premier Checking is the only Hanscom Federal Credit Union account that charges a monthly fee, although it can be avoided.
APYMinimum Balance Amount
0.10%
$0
  • Minimum opening deposit: $0
  • Monthly account maintenance fee: $9.95; waivable with an average daily balance of $2,000 or a combined average daily balance of $6,000 in any type of savings or loan account
  • ATM fee: $0
  • ATM fee refund: None
  • Overdraft fee: $30; free transfers if linked to savings account or Hanscom Federal Credit Union credit card

The Premier Checking account pays a flat rate of interest across all balances. It also has a slightly different ATM fee structure from the other checking accounts. You’ll never be assessed an ATM fee from Hanscom Federal Credit Union, no matter where you conduct your transaction, but you also won’t benefit from any ATM fee rebates.

Beyond that, the Premier Checking account shares many of the same free benefits as the other checking accounts, including the following:

  • Online/mobile access
  • Bill pay
  • Online statements
  • Online money transfer
  • Debit card
  • Free checks

One of the best benefits of the Premier Checking is the enhanced yield paid on CDs to Premier Checking customers.

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Free Kasasa Cash Back Checking

    Kasasa Cash Back Checking delivers its returns in the form of cash back on debit card transactions.

  • Minimum opening deposit: $1
  • Monthly account maintenance fee: $0
  • ATM fee: $0 for in-network ATMs
  • ATM fee refund: $20 per month
  • Overdraft fee: $30; free transfers if linked to savings account or Hanscom Federal Credit Union credit card

The Free Kasasa Cash Back Checking account pays customers 2 percent cash back on debit card purchases, up to $7 per month ($84 per year). The account also offers up to $20 monthly in ATM fee rebates.

To qualify for the cash back account, all of the following activities must post and settle in the account every month:

  • At least 12 debit or credit card purchases
  • At least 1 ACH credit/direct deposit
  • Enrollment in online statements

The account remains maintenance-fee free if these qualifications are met in any month, but no cash back will accrue that period.

In addition to the cash back benefit, this account also offers more traditional checking account offerings, including the following:

  • Unlimited check writing
  • Free online banking, bill pay, and transfers
  • Free mobile banking, including mobile deposits
  • Free debit/ATM card, with no annual fee
  • Free online statements

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Free Checking

The Free Checking account is Hanscom Federal Credit Union’s most basic offering, charging no fees and offering more limited services.
  • Minimum opening deposit: $0
  • Monthly account maintenance fee: $0
  • ATM fee: First 10 in-network ATM transactions are free; thereafter, $1.25
  • ATM fee refund: $0
  • Overdraft fee: $30; free transfers if linked to savings account or Hanscom Federal Credit Union credit card

The Free Checking account is the standard, basic account to get your foot in the door in terms of a checking account. There are no minimum deposit requirements or monthly fees, and the first 10 in-network ATM transactions are free. Under the Payday Perqs program, customers can receive their direct deposit paychecks up to two days early. Customers also get rewards on every purchase (terms apply), along with free checks, bill pay and mobile deposits.

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How Hanscom Federal Credit Union’s checking accounts compare

Hanscom Federal Credit Union offers a broad range of checking account options. Customers can choose everything from the no-frills Free Checking account to the high interest rates of the Kasasa Cash Checking account. For balances of up to $15,000, the Kasasa Cash pays an almost unmatched checking account interest rate, topping the best available checking account rates from across the nation. However, larger deposits don’t enjoy that premium.

Customers who prefer cash back may enjoy the 2 percent returns offered by the Kasasa Cash Back Checking account, although that benefit is capped at $7 a month. The credit union’s Premier Checking account is the only one that carries a monthly fee, but it can be waived with a modest deposit.

The account can be a good option for CD customers, as the Premier Checking account allows access to higher CD rates. Linking a savings account or Hanscom Federal Credit Union credit card is a good option, as it allows customers to avoid the $30 overdraft fees.

Hanscom Federal Credit Union’s savings account options

Primary (Share) Savings

Entry into credit union as a member is obtained through this mandatory savings account.
APYMinimum Balance Amount
0.10%
$25+
  • Minimum opening deposit: $25
  • Monthly account maintenance fee: $0
  • ATM fee: $0
  • ATM fee refund: None
  • Overdraft fee: $30; free transfers if linked to Hanscom Federal Credit Union credit card

A $25 deposit establishes credit union membership through this primary account, which also offers free online and mobile access. A flat interest rate is earned on all balances of $25 or more once the account is open. This rate is compounded daily and credited monthly. Through the account’s Payday Perqs program, customers can receive their direct deposit paychecks up to two days early.

As a savings account, transactions are limited to six per month. Any excess activity is assessed a $15 excess activity fee.

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Kasasa Saver

The Kasasa Saver account is a free savings account that pays dividends.
APYMinimum Balance Amount
1.00%
$0.01 to $50,000.00
0.10%
$50,000.01 and over
  • Minimum opening deposit: $1
  • Monthly account maintenance fee: $0
  • ATM fee: $0
  • ATM fee refund: None
  • Overdraft fee: $30; free transfers if linked to Hanscom Federal Credit Union credit card

This account serves as the depository for rewards earnings when linked to the Kasasa Cash or Kasasa Cash Back checking accounts. Customers who qualify for rewards from those two checking accounts automatically qualify for the best rates offered by the Kasasa Savings account. Specifically, requirements include:

  • Online statements
  • 12 monthly debit or credit transactions
  • At least 1 monthly ACH/direct deposit into a Kasasa Cash or Kasasa Cash Back account

The account also includes free online and mobile banking.

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Higher Yield Savings

Hanscom Federal Credit Union’s Higher Yield Savings account carries high minimums and a restrictive withdrawal policy.
APYMinimum Balance Amount
0.50%
$25,000
  • Minimum opening deposit: $25,000
  • Monthly account maintenance fee: $0
  • ATM fee: $0
  • ATM fee refund: None
  • Overdraft fee: $30; free transfers if linked to Hanscom Federal Credit Union credit card

The Higher Yield Savings account requires $25,000 to open but pays a high rate of interest on all balances above that level. Unlike traditional savings accounts which assess an excess activity fee after six monthly withdrawals, the Higher Yield Savings account restricts fee-free withdrawals to just one per month. After that, you’ll pay $25 for any additional withdrawals.

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Holiday and Vacation Club

APYMinimum Balance Amount
0%
$1
  • Minimum opening deposit: $1
  • Monthly account maintenance fee: $0
  • ATM fee: n/a
  • ATM fee refund: n/a
  • verdraft fee: n/a

The Holiday and Vacation Club savings accounts are two options at Hanscom Federal Credit Union that operate much like those at other institutions, affording customers the opportunity to earn interest on savings dedicated to a specific purpose. In the case of the Holiday and Vacation accounts, interest is earned beginning on the first dollar deposited, but money cannot be withdrawn until October. For Vacation Club accounts, the same principle applies, but the customer can select the month in which funds are allowed to be withdrawn, such as June for a summer vacation.

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Secondary Shares

APYMinimum Balance Amount
0.10%
$25
  • Minimum opening deposit: $1
  • Monthly account maintenance fee: $0
  • ATM fee: $0
  • ATM fee refund: None
  • Overdraft fee: $30; free transfers if linked to Hanscom Federal Credit Union credit card

The Secondary Shares account at Hanscom Federal Credit Union operates exactly like the primary shares account, although the minimum is only $1. The account is intended to serve the needs of customers saving for a particular need, without the withdrawal restrictions of a Holiday or Vacation Club savings account. Customers can open as many secondary shares accounts as need be to help keep their finances straight.

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How Hanscom Federal Credit Union’s savings rates compare

Hanscom Federal Credit Union’s basic savings account rates on its Primary and Secondary Shares and Holiday and Vacation Club accounts are slightly above the national average. Rates become competitive on a national basis with the pickup in yields offered on the Higher Yield Savings and Kasasa Saver accounts. Although not quite on par with the best savings rates in the nation, these two accounts offer competitive yields, particularly on deposits of up to $50,000 in the Kasasa Saver account.

Hanscom Federal Credit Union’s CD rates

EasyStart CD

The EasyStart CD has a lower minimum opening deposit but offers a limited range of maturities.
TermAPY
3 months0.30%
6 months0.30%
12 months0.30%
  • Minimum opening deposit: $250
  • Minimum balance amount to earn APY: $250
  • Early withdrawal penalty: 90 days’ interest on maturities of one year or less; 180 days’ interest on maturities longer than one year

The EasyStart CD at Hanscom Federal Credit Union lets customers get started investing in CDs with as little as $250. Unlimited additional deposits, with a minimum of $10, can be added at any time. However, certificates are only offered for three, six or 12 months. EasyStart CDs also have different rates than Hanscom Federal Credit Union’s traditional CDs.

Additional features of the EasyStart CDs include the following:

  • Automatically renewable into the same term
  • 10 calendar day grace period
  • Online and mobile access
  • No monthly fees
  • Federally insured

Dividends accrue daily and are paid at the end of the month.

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Traditional CD

While Hanscom Federal Credit Union offers a standard range of CD maturities, higher yields are paid to Premier Checking customer.
TermAPY
3 to 5 Month0.30%
6 to 11 Month0.40%
11 Month (available with Premier Checking)1.50%
12 to 17 Month0.60%
18 to 29 Month0.70%
30-59 Month0.75%
48 Month (available with Premier Checking)2.75%
60 Month1.00%
  • Minimum opening deposit: $1,000
  • Minimum balance amount to earn APY: $1,000
  • Early withdrawal penalty: 90 days’ interest on maturities of one year or less; 180 days’ interest on maturities longer than one year

Hanscom Federal Credit Union’s Traditional CDs carry a $1,000 minimum and cover a range of maturities, from three to 60 months. Premier Checking account customers get higher rates on 11-month and 48-month CDs only. Additional features of Hanscom Federal Credit Union’s traditional CD accounts include:

  • Automatic renewal into same term
  • A renewal grace period of 10 calendar days
  • Mobile and online access
  • FDIC insurance
  • No monthly fees

As with the credit union’s EasyStart CDs, dividends accrue daily and post to the account on the last day of every month.

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NCUA Insured

CU Thrive Automated Savings Program

Required monthly deposits and a single term generate high yields in this hybrid savings/CD account.
APYMinimum Balance Amount
2.00%
$0+
  • Minimum opening deposit: $1
  • Monthly account maintenance fee: $0, with minimum $5+ automated deposits monthly
  • ATM fee: n/a
  • ATM fee refund: n/a
  • Overdraft fee: n/a

The CU Thrive Automated Savings Program requires monthly automated transfers of $5 to $500 from a Hanscom Federal Credit Union checking account. Rates are fixed for an entire 12-month term. Only one CU Thrive account can be opened per member, and the account does not renew at the end of the 12-month term.

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How Hanscom Federal Credit Union’s CD rates compare

Hanscom Federal Credit Union’s CD rates are generally high, topping the national average across every maturity. Yet, rates on the traditional CDs don’t approach the best available online CD rates.

The true gem in the lineup is the hybrid CU Thrive Automated Savings Program. Customers are required to make monthly transfers into the account from an eligible Hanscom Federal Credit Union checking account, and the term is limited to 12 months only, with no automatic renewal. However, the rate is exceptionally high, particularly on such a short-term account. One of the few drawbacks to the program is that monthly contributions are limited to $500, meaning the total amount of interest earned will be relatively low.

Hanscom Federal Credit Union’s money market account

Money Market Account

APYMinimum Balance Amount
0%
Balance less than $2,000.00
0.10%
$2,000.00 - $9,999.99
0.20%
$10,000.00 - $24,999.99
0.25%
$25,000.00 - $49,999.99
0.25%
$50,000.00 - $74,999.99
0.35%
$75,000.00 - and over
  • Minimum opening deposit: $2,000
  • Monthly account maintenance fee: $0
  • ATM fee: $0
  • ATM fee refund:  None
  • Overdraft fee: $30; free transfers if linked to a savings account or Hanscom Federal Credit Union credit card

The Hanscom Federal Credit Union Money Market account compounds dividends daily and credits them monthly to customers with balances of at least $2,000. The account comes with a free box of checks and no monthly fee. Rates step up gradually in a tiered structure, topping out for balances of $75,000 or more.

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How Hanscom Federal Credit Union’s money market rates compare

Rates for Hanscom Federal Credit Union’s Money Market account compare favorably with its competitors, topping the national average across every interest tier level. At the highest tier, for deposits of $75,000 or more, rates are nearly quadruple the national average. The best money market rates available nationwide, however, are much higher than what you can earn at Hanscom Federal Credit Union.

Hanscom Federal Credit Union’s IRA rates

IRA Share

The IRA Share account is designed for smaller IRA balances.
APYMinimum Balance Amount
0.10%
$1
  • Minimum opening deposit: $1
  • Monthly account maintenance fee: $0
  • ATM fee: n/a
  • ATM fee refund: n/a
  • Overdraft fee: n/a

The IRA Share account is a flexible slush fund for smaller IRA balances. Money can be accessed at any time and moved into higher-yielding investments within an IRA. Larger balances can earn higher interest in both the IRA Money Market and the IRA certificates available at Hanscom Federal Credit Union.

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IRA Money Market

The IRA Money Market provides flexibility with higher yields.
APYMinimum Balance Amount
0%
Balance less than $2,000.00
0.10%
$2,000.00 - $9,999.99
0.20%
$10,000.00 - $24,999.99
0.25%
$25,000.00 - $49,999.99
0.25%
$50,000.00 - $74,999.99
0.35%
$75,000.00 - and over
  • Minimum opening deposit: $2,000
  • Minimum balance to earn APY: $2,000
  • Monthly account maintenance fee: $0
  • ATM fee: n/a
  • ATM fee refund: n/a
  • Overdraft fee: n/a

Savers with larger balances that still want some flexibility in accessing their funds might consider Hanscom Federal Credit Union’s IRA Money Market account. There are six rate tiers. Balances of at least $2,000 pay nearly double the rate of the IRA Share account, while in the top tier — for balances of at least $75,000 — rates are more than triple those of the IRA Share account. Withdrawal activity in this account is restricted to six transactions per month, in accordance with federal standards.

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IRA Certificates

Hanscom Federal Credit Union’s IRA Certificates are traditional CDs with higher rates and less flexibility than the credit union’s other IRA offerings.
TermsAPY
6 Month0.40%
12 Month0.60%
18 Month0.70%
30 Month0.75%
60 Month1.00%
  • Minimum opening deposit: $500
  • Minimum balance to earn APY: $500
  • Early withdrawal fee: 90 days’ interest on maturities of one year or less; 180 days’ interest on maturities longer than one year

Hanscom Federal Credit Union offers a simplified maturity schedule in its IRA CDs as opposed to its non-IRA CDs, with just five maturities available in its IRAs. Minimum deposits are lower, however, at $500. Rates on Hanscom Federal Credit Union’s IRA CDs are generally higher than can be earned in the credit union’s IRA money market account.

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How Hanscom Federal Credit Union’s IRA rates compare

The limited options available for CDs in Hanscom Federal Credit Union’s IRAs are slightly above national averages for every maturity. You can find better rates at competitors when looking for the best available IRA CD rates on a national basis.

Rates on the credit union’s IRA money market account are the same as in its non-IRA accounts, meaning they are well above-average but not quite approaching the top money market rates in the country.

Although the IRA Share account is not a great choice as a longer-term investment, it’s good to have an account that pays interest even on small amounts until they can be better deployed.

How to Get Hanscom Federal Credit Union’s accounts

The application process for any type of Hanscom Federal Credit Union account is the same. The one exception is the CU Thrive Automated Savings Program, as it already requires an open Hanscom Federal Credit Union account. To participate in the CU Thrive program, you can request a callback from the credit union by completing a form on the website, or you can visit a branch or call the credit union’s Customer Service line. For all other accounts, click any of the numerous “open an account” links on the credit union’s web pages and you’ll be brought to the application page. You’ll need three pieces of information to get started:

  • Your Social Security number or Individual Tax Identification Number (ITIN)
  • A valid, government-issued ID, such as a passport, driver’s license, or state or military ID
  • A source of funding for your account, such as a checking or savings account, or a credit or debit card

The first step in the application process is to select the type of account you’d like to open. The application page has a drop-down menu that offers more than a dozen options.

Once you select your account, you’ll have to qualify for membership. If you’re already a member and are applying for a new account, you can select that option to continue. Otherwise, you’ll have to qualify in one of the following five ways:

  • You are an employee or retired employee of a federal government agency with a Massachusetts duty station
  • You are an employee of a qualifying employer
  • You are active duty or retired military
  • You are the relative or domestic partner of a Hanscom Federal Credit Union member
  • You are a member of or will be joining a sponsoring member organization

From there, the application asks for the standard personal and financial information you’d expect when opening an account at any financial institution. For example, you’ll be asked to provide your name and address, date of birth and employment information. Once you give the appropriate consent and your information is verified, you’ll be asked for funding information for your account.

If you don’t want to open an account online, you can visit a representative at any of the credit unions branches in Massachusetts or Virginia. You can also call the credit union if you have any account-opening questions.

Overall review of Hanscom Federal Credit Union’s products

Hanscom Federal Credit Union offers a very extensive range of accounts for its members. Whereas some financial institutions only offer a single checking or savings account, for instance, Hanscom Federal Credit Union carries four or more accounts of each type. Even in its IRAs, the credit union offers three options, a share account, a money market account and CDs.

For the most part, fees and minimums are low on Hanscom Federal Credit Union’s products. However, the credit union doesn’t offer a completely fee-free lineup, and it doesn’t offer fee rebates on non-network ATMs.

Interest rates offered at Hanscom Federal Credit Union are a mixed bag. Some accounts don’t pay any interest at all, while others are among the best available nationwide. Of particular note is the CU Thrive Automated Savings Program, which carries an exceptional rate but also has contribution limits and just a single, 12-month term.

With a broad range of product offerings that offer mostly competitive terms, Hanscom Federal Credit Union members shouldn’t have a problem finding accounts that serve their specific needs.

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Best Credit Cards for Bad Credit November 2020

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If you have bad credit, it can be difficult to get approved for loans and credit cards. But it is not impossible. Even people with bad credit have options – which we will now explain.

What exactly is a bad credit score? When we’re talking about obtaining credit via credit cards, the magic number is somewhere between 620 and 650. If your credit score falls below 650, you’re going to have a difficult time obtaining credit from some of the larger lending institutions, and if it’s below 620, you’re going to have a difficult time obtaining credit from anyone — including smaller financial institutions like credit unions and independent marketplace lenders.

There are, however, some products for which you’ll have an easier time qualifying. Before you apply, make sure you’re prepared to be responsible with your new line of credit so you can boost your score and credit history rather than damaging it further. The best way to do this is to spend within your means by creating a budget and sticking to it. Here are some helpful tools to help you do just that. Remember to always pay your bill off in full on or before the due date each month to establish good credit.

Here are the products and topics we’ll be discussing today:

Check if You’re Pre-qualified

Before you apply for a credit card check if you’re pre-qualified from a variety of institutions. This does not hurt your credit score and is a good first step when looking to apply for credit. You can read our complete guide to getting pre-qualified for a credit card here.

Build Credit with Secured Credit Cards

If you are trying to rebuild your credit, one of the best approaches is to get a secured credit card. In order to get the card, you will have to write a check to deposit with the credit card company. This money will be your line of credit.

In order to effectively rebuild your credit, you must actually use the card, and we recommend not charging more than 20% of your credit line. For example, if you have a $500 credit line, you should not charge more than $100. Then, pay off your balance in full every single month. You can even build credit with $10 a month on a secured card and see your credit score rise.

After you’ve consistently managed your secured card well over a period of time, you may be able to increase your credit line beyond your initial deposit or migrate to an unsecured credit card. With most companies, this is a tedious process that you’ll have to initiate. You also aren’t guaranteed to get results even after you’ve made a request.

Discover operates differently than most companies in this realm, making it our number one pick for secured cards.

Discover it® Secured

If you’re looking for a secured credit card, look no further than the Discover it® Secured. On top of being great for people with a bad credit score, Discover will also accept applicants who have no credit history at all. Discover offers great ways for you to rebuild your credit and be on the way to an unsecured card.

Magnify Glass Pros

  • Bankruptcies May Be OK If you have a Chapter 7 bankruptcy on your credit report, it won’t automatically disqualify you from getting approved for a Discover it® Secured. However, there are no guaranteed approvals. This is a positive if you’ve had trouble getting a credit card in the past.
  • Helps You Rebuild Your Credit This is a legitimate way to rebuild your credit when you don’t qualify for other cards, or the agreement you are offered by another company is laden with fees and high interest rates.
  • Offers a Rewards Program Not only can you rebuild your credit, but you’ll also earn rewards points as you do so. This is a great feature that many secured cards don’t offer and is a reason why we consider Discover number one. Earn 2% cash back at gas stations and restaurants on up to $1,000 in combined purchases each quarter. Plus, earn unlimited 1% cash back on all other purchases – automatically. For new cardmembers, Discover matches the cash back you earn at the end of your first year of card membership, automatically.
  • Easy to Transition to a Discover Account Without a Security Deposit Starting at eight months, Discover automatically reviews your account to see if you’re eligible to have your security deposit returned while continuing to enjoy the card benefits. This is typically a process you’d have to initiate with other lenders. It’s good to note that Discover reviews all loans, and credit cards including Discover when making their decision.

Cons Cons

  • Rewards Limited There’s a quarterly spending limit on the higher rewards rate — 2% cash back at gas stations and restaurants on up to $1,000 in combined purchases each quarter. Plus, earn unlimited 1% cash back on all other purchases – automatically. Regardless, that’s $20 back, which is a great reward when your goal is to increase your credit score.
  • Be Careful Not to Overspend As with the other cards in this review, you have to be careful that the rewards program doesn’t entice you to overspend. Otherwise, you run the risk of damaging your credit score further. Make sure that your primary goal, to raise your credit score, supersedes the urge to spend too much money in order to get rewards.
Bottom line

Bottom line

The Discover it® Secured is a fantastic product for those with bad credit. Pay your balance in full by the end of every statement period and your financial life is almost guaranteed to get rosier. You’ll even have the added benefit of rewards — just be careful not to let the rewards program lure you into overspending. With proper practices, you’ll be on your way to an unsecured card and a better credit score.

Read our full review of the Discover it® Secured

Also Consider

OpenSky® Secured Visa® Credit Card from Capital Bank N.A.

OpenSky® Secured Visa® Credit Card

This card does not do a credit check, and no bank account is needed to apply. This is beneficial for those with low credit scores or no access to a bank account. If you’ve filed for bankruptcy, you’re in luck because they don’t care to know, unlike other institutions. However, OpenSky® Secured Visa® Credit Card charges a $35 annual fee, which the Discover it® Secured does not. This can be a deal breaker if you don’t want to pay a fee, since there are many secured cards without fees.

For more options, read our article on the best secured credit cards with low deposit requirements.

Our Credit Union Favorite

If you’re looking to open a credit card with bad credit, it can be hard to find a card you qualify for. That’s where credit unions come in. They are sometimes more accepting of your credit history and have cards especially designed for people with low credit scores — helping your approval chances.

Visa® Classic from Georgia's Own Credit Union

Georgia’s Own Credit Union offers a variety of credit cards all with low interest. The Visa® Classic from Georgia's Own Credit Union is positioned toward those who need to rebuild credit and boasts a low APR. When you apply for a credit card on Georgia’s Own website you are directed toward an application that is for all credit cards they offer. This means that depending on your creditworthiness, you may not be directed to the Visa® Classic from Georgia's Own Credit Union as an option. Therefore, if you want to apply directly for the card, the best bet is to speak with a loan officer who will tell you if you’re pre-approved for the Visa® Classic from Georgia's Own Credit Union.

Visa® Classic from Georgia's Own Credit Union

Annual fee
$0
Regular Purchase APR
11.99-16.99% Variable
Credit required
fair-credit

Magnify Glass Pros

  • Good chance of getting approved Georgia’s Own tailored this credit card toward those needing to rebuild or re-establish their credit history. This gives those with bad credit a greater chance of being approved. Also, if your score is above 620, you are more likely to be approved.
  • Fair APR This card has a fair APR ranging from 11.99-16.99% variable. This is significantly lower compared to other cards targeted to people with less than perfect credit, with APRs as high as 25% or more. Although your goal is to pay every bill in full and on time each month, if you keep a balance, this low APR won’t accrue as much interest as other cards.

Cons Cons

  • Have to join the credit union In order to get this card, you have to join Georgia’s Own Credit Union. Anyone can become a member regardless of residence. If you don’t qualify for Georgia’s Own free eligibility options, you will have to join the GettingAhead Association, which has a $5 annual membership fee. The best bet is to speak to a loan officer (404-874-1166) and see if you’re pre-approved for the credit card, and if pre-approved, you can join GettingAhead while completing your credit card application. All members will also need to keep $5 in a savings account that must remain in the account while you have the card open.
  • Foreign transaction fee of 2% of the U.S. dollar amount of each transaction Make sure to leave this card at home when you travel abroad as you’ll be charged a foreign transaction fee of 2% of the U.S. dollar amount of each transaction. This is slightly lower than most cards, which charge a 3% foreign transaction fee, yet high enough to increase your bill significantly if you make purchases abroad.
  • No rewards program There is no rewards program for this credit card. Georgia’s Own offers several other cards that have rewards programs, but you may have a harder time qualifying if you don’t have a good credit score.
Bottom line

Bottom line

The Visa® Classic from Georgia's Own Credit Union is a good option for people who have a bad credit score. If you don’t mind joining a credit union and plan on practicing proper credit behavior, you can rebuild your credit score. Later on, you’ll be able to qualify for other credit cards that have rewards programs.

Read our full review of the Visa® Classic from Georgia's Own Credit Union

Best for Cash: Personal Loans

If you’re looking to get some cash in your pocket, credit cards in general aren’t your best answer. Cash advances are not ideal, and putting a purchase you can’t currently afford onto a credit card with a high interest rate attributable to your not-so-great credit score is going to be an expensive venture.

Instead, you’ll want to consider personal loans. They’re admittedly a little more work up front with the application process, but the savings can be worth it. You can check to see if you are prequalified without impacting your credit score at most lenders. And LendingTree has created a tool that lets you compare rates from dozens of lenders at once, without impacting your score.

LendingTree

LendingTree offers a one-stop tool that could help borrowers find numerous personal loan offers. After entering some basic information, you may receive offers from up to five different lenders in a matter of minutes based on your creditworthiness. If you prefer to go directly to the lender’s site you can use one of the options listed below.

LendingTree

SEE OFFERS Secured

on LendingTree’s secure website

LendingTree is our parent company

LendingTree

Loan Amount
up to $50,000
Term
24 to 60 Months
APR Range
As low as 2.49%
Origination Fee
Varies
Credit Required
Minimum 500 FICO®
Soft Pull
Compare offers without hurting your score.

LendingTree is not a lender. LendingTree is unique in that you may be able to compare up to five personal loan offers within minutes. Everything is done online and you may be pre-qualified by lenders without impacting your credit score. Terms Apply. NMLS #1136.



As of 17-May-19, LendingTree Personal Loan consumers were seeing match rates as low as 2.49% (2.49% APR) on a $20,000 loan amount for a term of three (3) years. Rates and APRs were based on a self-identified credit score of 700 or higher, zero down payment, origination fees of $0 to $100 (depending on loan amount and term selected). Terms Apply. NMLS #1136

Magnify Glass Pros

  • Check Multiple Offers at Once You can check personal loan offers from a wide range of lenders including Avant, LendingClub and Best Egg. The entire process happens online for no-cost and is fast and easy.
  • Soft Pull on Your Credit LendingTree performs a soft pull on your credit in order to provide you accurate loan offers from lenders. This does not affect your credit score and can give you a good picture of what to expect if you’re approved for a loan.

Cons Cons

  • Need to Create an Account to View Offers The only way to view your personal loan offers is to create an account at LendingTree. This is a minor step, but it does allow you the ease of saving your offers so you can review them later.
Bottom line

Bottom line

LendingTree offers a great tool that lets you easily check your rates for a variety of lenders, all in a matter of minutes. This is a great way for you to see what rates you may get and allows you to shop around for your best offer, without the hassle of going to multiple websites.

Avant

Avant offers personal loans even to those with less-than-desirable credit. Because there is no prepayment penalty, you can pay off your loan before the end of your term without consequence.

Avant

Loan Amount
$2,000 – $35,000
Term
24 to 60 Months
APR Range
9.95%-35.99%
Origination Fee
Up to 4.75%
Credit Required
580 Minimum Credit Score
Soft Pull
Checking your Loan Options will not affect your credit score.

Avant is an online lender that offers personal loans ranging from $2,000 to $35,000. ... Read More


*If approved, the actual loan terms that a customer qualifies for may vary based on credit determination, state law, and other factors. Minimum loan amounts vary by state.

**Example: A $5,700 loan with an administration fee of 4.75% and an amount financed of $5,429.25, repayable in 36 monthly installments, would have an APR of 29.95% and monthly payments of $230.33.

Based on the responses from 7,302 customers in a survey of 140,258 newly funded customers, conducted from August 1, 2018 - August 1, 2019, 95.11% of customers stated that they were either extremely satisfied or satisfied with Avant. 4/5 Customers would recommend us. Avant branded credit products are issued by WebBank, member FDIC.

Magnify Glass Pros

  • Apply Online The entire Avant application process happens online. This saves you the hassle of filling out paperwork and visiting a local branch.
  • Check Your Loan Options Before You Apply Avant allows you to check your Loan Options that you would be offered with a soft pull on your credit. This will not impact your credit score. This is helpful if you’re shopping around for different rates and gives you a realistic picture of what to expect should you choose Avant.
  • Could Save Money over Subprime Credit Cards Depending on the interest rate and upfront fee percentage you are offered, a personal loan from Avant could save you money over putting purchases on a subprime credit card. The ability to preview your interest rate can also help you compare between personal loans and other possible options.

Cons Cons

  • High Interest Rates Because you’re a subprime borrower, you’re not likely to qualify for the lowest interest rate offered. You’re more likely to be offered something closer to the 35.99% rate. This is a very high rate, and will add substantially to your loan repayments.
Bottom line

Bottom line

While there’s only one con for Avant’s personal loans, it’s a pretty big one. The interest rate can be extremely high, so do your math before deciding if this is a good product for you. And be sure to take advantage of the fact that they’ll let you check your interest rate before officially submitting your application. Use this feature to shop around for best offers and check if you qualify for a better loan

OneMain Financial

Avant is easier to apply for as the application process will take place online, but if you’re willing to go somewhere in person, you can also apply with OneMain Financial. Its application is also online, but in order to be approved, you’ll have to show up at a local branch with documentation backing the information you submitted at home.

OneMain Financial

Loan Amount
$1,500 – $20,000
Term
24 to 60 Months
APR Range
18.00%-35.99%
Origination Fee
1.00%-10.00%
Credit Required
Not specified
Hard Pull
If you apply for a loan, a hard pull will occur, which will place a credit inquiry on your report and can lower your score.

OneMain Financial offers quick turnaround times and you may get your money the same day... Read More


Not all applicants will qualify for larger loan amounts or most favorable loan terms. Loan approval and actual loan terms depend on your ability to meet our credit standards (including a responsible credit history, sufficient income after monthly expenses, and availability of collateral). Larger loan amounts require a first lien on a motor vehicle no more than ten years old, that meets our value requirements, titled in your name with valid insurance. Maximum annual percentage rate (APR) is 35.99%, subject to state restrictions. APRs are generally higher on loans not secured by a vehicle. Depending on the state where you open your loan, the origination fee may be either a flat amount or a percentage of your loan amount. Flat fee amounts vary by state, ranging from $25 to $400. Percentage-based fees vary by state ranging from 1% to 10% of your loan amount subject to certain state limits on the fee amount. Active duty military, their spouse or dependents covered under the Military Lending Act may not pledge any vehicle as collateral for a loan. OneMain loan proceeds cannot be used for postsecondary educational expenses as defined by the CFPB’s Regulation Z, such as college, university or vocational expenses; for any business or commercial purpose; to purchase securities; or for gambling or illegal purposes.

Borrowers in these states are subject to these minimum loan sizes: Alabama: $2,100. California: $3,000. Georgia: Unless you are a present customer, $3,100 minimum loan amount. Ohio: $2,000. Virginia: $2,600.

Borrowers (other than present customers) in these states are subject to these maximum unsecured loan sizes: Florida: $8,000. Iowa: $8,500. Maine: $7,000. Mississippi: $7,500. North Carolina: $7,500. New York: $20,000. Texas: $8,000. West Virginia: $14,000. An unsecured loan is a loan which does not require you to provide collateral (such as a motor vehicle) to the lender.

Magnify Glass Pros

  • Same-day funds when you get a prepaid debit card or check, up to $10,000
  • No prepayment penalties
  • Several locations across 44 states

Cons Cons

  • High APRs up to 35.99%
Bottom line

Bottom line

If you have a lower credit score and are limited in your options to take out a personal loan, OneMain Financial could provide you with a solution. However, be sure you understand the loan terms and the full cost of the loan.

Last Resort: Subprime Credit Cards

Subprime credit cards are those that lending institutions issue to those with “bad” credit. They are not a good solution to your credit woes. They almost always come with high interest rates and a litany of fees — both of which make it difficult to use this product responsibly.

For example, First Premier makes a business out of lending to subprime borrowers with bad credit. Most of their applicants are only awarded a $300 line of credit. That’s after they pay up to a $95 fee just to apply (which is not a common practice in the credit card industry) and a $75 annual fee. If you are approved for a higher credit limit, your annual fee for the first year may be higher ($79-$125). In the second year, the annual fee drops ($45-$49), but at this point you are charged a $6.25-$10.40 account servicing fee every single month.

The cherry on top? The card’s APR is 36%. Heaven forbid you are ever late on a payment — your balance will skyrocket with the insanely high interest rate. Don’t forget about the late payment fee — up to $39.

Another example is Credit One Bank — not to be confused with Capital One Bank, though their logos do look eerily similar. Not every Credit One Bank credit card comes with outrageous fees. But if you are a subprime borrower, you’re likely to qualify for higher rates.

Your credit may not be great, but that doesn’t make subprime credit cards a “fair” product. You may qualify for other, better options that aren’t as laden with fees. That’s why we recommend you first check if you’re pre-qualified for offers then look at store cards and personal loans before choosing a subprime credit card.

Bad Credit FAQs

Co-branded store cards can be used as payment anywhere the credit card company, such as Mastercard or Visa, is accepted. Private label cards can only be used at the company’s store. For example, if you get a private label card for New York & Company (meaning it is not co-branded with Visa or Mastercard), you can only use it for purchases at New York & Company. You would not be able to use it at any other store.

Your best bet is to ask. If you are applying online, pick up the phone and call or use the company’s online chat if available.

If you have a physical card in front of you, you’ll notice that store cards always have the associated credit card company shown on the front, whether that be Visa, American Express, Mastercard, or another.

Private label cards tend not to display this information, though a major financial institution that a lot of companies work with for their private label cards is Comenity. If you have a card associated with Comenity Bank, it is likely a private label card.

No. Most businesses have an online application for their store cards.

Personal loans are typically issued by more reputable lenders who aspire to more transparency than those in the payday loan space. Payday loans are often advertised as having interest rates somewhere between 10% and 30%, but that interest is charged over a short period of time, making their effective APR (annual percentage rate) much higher. Some payday loans have an effective APR of 400% or more.

The lender isn’t likely to tell you that, though. Many businesses in this space are predatory. Payday loans also tend to come with outrageous fees.

While rates and fees on personal loans for those with bad credit aren’t ideal, they’re more than substantially lower than those of payday loans. Make no mistake about it: despite enticing advertising promises of deceptive payday lenders, personal loans are an infinitely better option.

Borrowing cash from your credit card company often comes with a fee of 1%-5%. That may not seem terrible when you look at the upfront fees of many personal loans, but you also have to account for interest.

Unlike purchases you charge to your card, interest on cash advances starts accruing immediately. You do not get to wait for your next statement to be issued. The interest rate for cash advances is also often higher than that of regular purchases.

A personal loan is an installment loan with a balance that will go down if you pay the minimum payment each month. This makes it far easier to manage than debt accrued via a cash advance. If you only pay the minimum payment on a cash advance each month, your balance will go up at a quick pace, potentially spiraling out of control.

First of all, the less you charge, the easier it will be to pay back. Since you have a bad credit score, you may have had issues with charging too much in the past and being unable to pay it off.

Secondly, around 30% of your credit score is made up of your credit utilization ratio. You find this ratio by dividing the amount of credit extended to you by the amount you have borrowed. By borrowing only 20% of your available credit, you reduce the risk of having your current balance negatively impacting your credit score.

It can sometimes take a year or more to see your score improve by 100 points if you are doing everything correctly and responsibly.

Yes, but only if you use them responsibly, paying the balance off in full every month. Keep in mind your credit utilization ratio here, too.

Potentially. Ten percent of your credit score is made up of something called “credit mix.” You don’t need to have every single type of credit in your credit report, but you should have more than one type. Here are the five that count:

  • Credit cards
  • Installment loans
  • Retail accounts
  • Finance company accounts
  • Mortgage loans

Conceivably, if you have a mortgage or business debt tied to your Social Security number or EIN, you might be able to get away with rebuilding your score through a personal loan (which is an installment loan). The key is to manage all of those debts well — and to do so consistently — especially since you already have bad credit.

No. Transactions on prepaid debit cards do not get reported to the credit bureaus. Also, it’s important to remember that many prepaid cards come with a ton of fees.