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Best of, Credit Cards

Best Credit Cards for Bad Credit May 2020

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any credit card issuer. This site may be compensated through a credit card issuer partnership.

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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.

Read MagnifyMoney’s full Secured Credit Card Guide.

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
Fair

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.

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 3.49%
Origination Fee
Varies
Credit Required
Minimum 500 FICO®
Soft Pull
Compare offers without hurting your score.

LendingTree is our parent company. 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. LendingTree is not a lender. Terms Apply. NMLS #1136.



As of 17-May-19, LendingTree Personal Loan consumers were seeing match rates as low as 3.49% (3.49% APR) on a $10,000 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
600 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 $5,900 loan with an administration fee of 4.75% and an amount financed of $5,619.75, repayable in 36 monthly installments, with an APR of 29.95% would have monthly payments of $250.30.

Based on the responses from 11,574 customers in a survey of 210,584 newly funded customers, conducted from 1 Feb 2018 - 1 Aug 2019 95.05% 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.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

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Credit Cards, Reviews

CreditStacks Mastercard Review

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any credit card issuer. This site may be compensated through a credit card issuer partnership.

Written By

The CreditStacks Mastercard offers a unique opportunity for individuals with little or no U.S. credit history – such as recent college graduates or professionals relocating to the U.S. for employment – to be approved for a credit card.

That’s because instead of requiring a Social Security number (SSN) or individual taxpayer identification number (ITIN) as most traditional credit cards do, the CreditStacks Mastercard allows applicants to apply using a valid passport or U.S. government-issued ID, a U.S. visa or a permanent resident “green” card (if applicable), as well as proof of income. The CreditStacks Mastercard also allows you to apply up to 60 days prior to starting your new job in the U.S.

We break down the pros and cons of the CreditStacks Mastercard, and show how it compares to the Capital One® Secured Mastercard®, which is also designed to help individuals establish or rebuild credit.

CreditStacks Mastercard pros

No credit history required. With the CreditStacks Mastercard, you can apply without a Social Security number and with little or no U.S. credit history. Once you obtain your Social Security number, you must provide it within 60 days of account opening. At that point, CreditStacks will begin reporting your credit activity to the Equifax and TransUnion credit bureaus.

Note, if you have been living in the U.S. for more than one year, you will be required to provide a Social Security number when applying for the card. A credit check may also be performed.

Decent credit limit. The CreditStacks Mastercard offers a credit line of up to $5,000 – which is a generous amount for an unsecured credit card that doesn’t require credit history.

Your credit limit will be determined by the proprietary underwriting procedures of CreditStacks, which will consider your current employment situation and additional factors, instead of your credit score.

No annual fee. The CreditStacks Mastercard comes with a $0 annual fee.

Additional CreditStacks Mastercard benefits:

  • Mastercard ID Theft Protection(™). Access free identity theft resolution services, as well as Mastercard ID Theft Alerts(™).
  • Extended warranty. Receive an extended warranty of up to one year past a manufacturer’s warranty of 12 months or less.
  • Purchase protection. If you are dissatisfied with a purchase, you may be eligible to receive a full refund for up to 60 days from the date of purchase.
  • Price protection. Get reimbursed for the difference if you find a lower price for an eligible new item within 60 days of purchase using your CreditStacks Mastercard.
  • Purchase assurance. Cardholders receive coverage if an item is lost, damaged or stolen within 90 days of purchase.
  • Travel protections. The CreditStacks Mastercard offers a MasterRental(R) collision damage waiver, lost or damaged luggage insurance, travel accident insurance, baggage delay insurance and trip cancellation and trip interruption insurance. Plus, receive access to exclusive experiences and offers through Priceless Cities and special travel offers through Mastercard’s online booking tool.
  • Cellphone insurance. If you use your CreditStacks Mastercard to pay your monthly cellphone bill, you can receive coverage against theft or damage of up to $600 per claim and up to $1,000 per 12-month period.

CreditStacks Mastercard cons

No rewards program. The CreditStacks Mastercard does not offer a sign-up bonus or rewards on the purchases you make using the credit card. That said, when trying to build or rebuild credit, it’s best to focus on paying your bill on time and in full (when possible) each month, rather than racking up rewards.

No intro APR on purchases. The CreditStacks Mastercard does not offer a 0% intro APR on purchases – meaning, if you don’t pay your balance in full each month, you will be subject to interest charges at a rate of 15.49% Variable APR.

That said, the card’s ongoing APR for purchases is reasonable – considering that some cards designed for individuals with little or no credit come with APRs upwards of 26.99% (variable).

Compare it to the Capital One® Secured Mastercard®

Similar to the CreditStacks Mastercard, the Capital One® Secured Mastercard® is designed for individuals with little or no credit. However, because it is a secured credit card, the Capital One® Secured Mastercard® requires a refundable security deposit of $49, $99 or $200, for an initial credit line of $200.

If you deposit more money before your account opens, you may be eligible for a higher credit line, up to $1,000. Additionally, you can be given access to a higher credit line after demonstrating responsible card usage by making your first five monthly payments on time.

While the Capital One® Secured Mastercard® does not require U.S. citizenship to apply, it does require a valid SSN or ITIN, as well as a residential address in the U.S. or a U.S. military location.

See how the cards compare side-by-side in the table below.

CreditStacks Mastercard vs. Capital One® Secured Mastercard®

 CreditStacks MastercardCapital One® Secured Mastercard®
Annual fee$0$0
Rewards rateN/AN/A
Credit lineUp to $5,000$200-$1,000
Deposit requiredNone$49, $99 or $200
Regular purchase APR15.49% Variable26.99% (Variable)

The Capital One® Secured Mastercard® also comes with a number of benefits, including auto rental collision damage waiver, travel accident insurance, extended warranty and 24-hour travel assistance services. As a Capital One member, you will also have access to virtual card numbers and account alerts from Eno, as well as access to your credit score and fraud monitoring through CreditWise.

But if you plan to carry a balance on your card, you’ll be better off with the CreditStacks Mastercard, since the Capital One® Secured Mastercard® comes with a substantially higher APR of 26.99% (Variable).

Read our: Capital One Secured Mastercard review

Which credit card is best for me?

If you haven’t yet established credit in the U.S., the CreditStacks Mastercard could be a good fit. In addition to not requiring a Social Security number for approval, the card helps build your credit by reporting to two major credit bureaus.

But if you’re in the market for a secured credit card and already have a SSN or ITIN, the Capital One® Secured Mastercard® is a good alternative. While the card offers a much lower credit line than the CreditStacks Mastercard, it does offer a variety of useful benefits that aren’t common for a secured credit card.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Advertiser Disclosure

Credit Cards, Featured, News

Average U.S. Credit Card Debt in 2020

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

Written By

Credit card balances are at all-time highs, and absent any other relief, the recent rate cuts by the Federal Reserve will do little to slow down growth in total balances that borrowers carry month to month. And while it’s still too early to know for certain, the cash crunch many households are experiencing in 2020 due to the COVID-19 pandemic may mean even greater average monthly balance increases than in recent years.

We’ve updated our statistics on credit card debt in America to illustrate how much consumers are now taking on.

  • Americans paid banks $121 billion in credit card interest in 2019. That’s up 7% from $113 billion in interest paid in 2018, and up 56% since 2014.
  • In February 2020, the average APR on credit card accounts assessed interest was 16.61%. Although the Federal Reserve has cut the key Federal Funds rate by two percentage points since mid-2019, the more recent cuts aren’t yet reflected in lower interest assessed to balances carried from month to month.
  • Total revolving credit balances are $1.05 trillion, as of February 2020. The vast amount of this balance is from spending on credit cards from banks and retailers, while $83 billion comes from revolving balances, such as overdraft lines of credit.
  • Americans carry $687 billion in credit card debt that isn’t paid in full each month. This estimate includes people paying interest, as well as those carrying a balance on a card with a 0% intro rate.
  • 43.2% of credit card accounts aren’t paid in full each month. Those who don’t pay in full tend to have higher balances, which is why the percentage of balances not paid in full (71%) is higher than the percentage of accounts not paid in full (43.2%).
  • The average credit card balance in 2019 was $6,194 for individuals with a credit card. That’s an increase from $6,040 in 2018.

Credit card use

  • Number of Americans who actively use credit cards: 184 million as of 2019, according to TransUnion.
  • Number of Americans who carry credit card debt month to month: 77 million.
    • We estimate 42% of active card users carry debt month to month, based on the Fed’s Survey of Consumer Finances.

Credit card debt

  • Total credit card debt in the U.S. (not paid in full each month): $687 billion
  • Average APR: 16.61% (also excludes those with a 0% promotional rate for a balance transfer or purchases). This estimate comes from the Federal Reserve’s monthly reporting of APRs on accounts assessed interest by banks.

The above estimates only include the credit card balances of those who carry credit card debt from month to month — they exclude balances of those who pay in full each month.

Credit card balances

  • Total credit card balances: $1.05 trillion as of February 2020, an increase of 3.3% from February 2019. This includes credit and retail cards, and a small amount of overdraft line of credit balances.
  • Average number of credit cards per consumer: 3.1, according to Experian. This doesn’t include an average of 2.5 retail credit cards.
  • Average credit card balance: $6,194. The average consumer has $1,155 in balances on retail cards.

The above figures include the credit card statement balances of all credit card users, including those who pay their bill in full each month.

Who pays off their credit card bills?

In 2019, fewer accounts were paid in full than accounts with a balance carried from month to month. According to the American Bankers Association:

  • Revolvers (carry debt month to month): 43.2% of credit card accounts
  • Transactors (use card, but pay in full): 31.1% of credit card accounts
  • Dormant (have a card, but don’t use it actively): 25.6% of credit card accounts

Delinquency rates

Delinquency rates peaked in 2009 at nearly 7%, but in 2019 delinquency rates were 2.6%, historically well below the long-term average.

Credit card debt becomes delinquent when a bank reports a missed payment to the major credit reporting bureaus. Banks typically don’t report a missed payment until a person is at least 30 days late in paying. When a consumer doesn’t pay for at least 90 days, the credit card balance becomes seriously delinquent. Banks are very likely to take a total loss on seriously delinquent balances.

Debt burden by income

Those with the highest credit card debts aren’t necessarily the most financially insecure. According to the 2016 Survey of Consumer Finances (the most recent data available), the top 10% of income earners who carried credit card debt had nearly twice as much debt than the average borrower.

However, people with lower incomes have more burdensome credit card debt loads. Consumers in the lowest earning quintile had an average credit card debt of $2,100. However, their debt-to-income ratio was 13.9%. On the high end, earners in the top decile had an average of $12,500 in credit card debt, though their debt-to-income ratio was just 4.8%.

A look at American incomes and credit card debt

Income percentileMedian incomeAverage credit card debtCredit card debt-to-income ratio
0%-20%$15,100$2,10013.9%
20%-40%$31,400$3,80012.1%
40%-60%$52,700$4,4008.3%
60%-80%$86,100$6,8007.9%
80%-90%$136,000$8,7006.4%
90%-100%$260,200$12,5004.8%

Source: 2016 Survey of Consumer Finances data

Although high-income earners have more manageable credit card debt loads on average, they aren’t taking steps to pay off the debt faster than lower-income debt carriers. If an economic recession leads to job losses at all wage levels, we could see high levels of credit card debt in default.

Generational differences in credit card use

In Q2 2019, Generation X cardholders had the highest credit card balances. The average cardholder from this generation had a balance of $8,215, according to Experian. Baby boomers held an average balance of $6,949, comparatively.

At the other end of the spectrum, millennials — who are often characterized as frivolous spenders — held significantly lower credit card balances, at $4,889. They also carry fewer (3.2) of credit cards in their wallets. Generation X carry 4.3 credit cards and baby boomers have 4.8 credit cards, on average.

How does your state compare?

Using data from Experian, as well as data from the Federal Reserve Bank of New York Consumer Credit Panel and Equifax, you can compare average credit card balances by state.

Differences in credit card debt by generation

In 2019, Generation X had more credit card debt, on average, than baby boomers, as those in their mid-40s typically have the largest amount of expenses relative to both younger and older consumers.

Methodology

In February 2020, MagnifyMoney collected and analyzed credit card data from government and industry sources, including the American Bankers Association, Federal Reserve, the Federal Deposit Insurance Corp., Experian, TransUnion and Equifax, to determine average credit card balances, interest rates, usage and delinquency rates.

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