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Updated on Thursday, October 26, 2017
Instant-approval credit cards are exactly what the name implies — immediate, instant-access lines of credit for those who qualify. It goes without saying that they’re ideal for those who need spending power now, but be sure to do your homework before going on an application spree.
Here’s what to know about instant-approval credit cards.
Instant-approval credit cards: Explained
These cards work just like any other credit card, except that in many cases, you can begin using an instant-approval card the same day you’re approved.
In other words, you’ll want to use these cards responsibly to avoid digging yourself into an unplanned debt hole. (We’ll unpack those details in a minute.) The application process varies from card to card, but the higher your credit score, the better your chances of scoring a card with reasonable terms.
You’re more likely to get approved by, for example, if you have “good to excellent credit. “That’s not to say that instant approval cards are off the table if you have less-than-perfect credit; there are plenty of lenders willing to work with people in this camp, but keep in mind that those with higher credit scores will generally get better interest rates and higher spending limits.
Beverly Harzog, credit card expert and author of “The Debt Escape Plan,” cautions people looking for quick access to credit to be sure they’re using it for smart reasons.
“The basic rules are the same: read the fine print and try not to carry a balance,” Harzog tells MagnifyMoney. “Just because it’s instant doesn’t mean it’s a good card for you. Research all your choices and make an informed decision.”
Another thing to keep in mind is that the word “instant” can’t always be taken literally. With the Discover card mentioned above, for instance, the company usually issues what’s called a “conditional approval” after receiving your credit score and approving your application. This will take a deep dive into your credit history, income and financial background, while also verifying that you indeed meet all the card’s requirements. The takeaway? Instant approval doesn’t always mean it’s a guarantee.
Why you might need an instant-approval card
Instant-approval cards are ideal for people who need credit in a hurry. There’s also the convenience factor of not having to wait too long to start using them. While the application and approval process are more accelerated, Harzog says that your standards should stay high.
According to Harzog, the ideal candidate for an instant-approval card is someone who needs to make an immediate purchase and will be able to pay it off by the time the first credit card bill comes due, thus avoiding interest. If it’s a big-ticket purchase that’s going to take you a bit longer to pay for, using an instant-approval card with a reasonable interest rate is your second-best choice.
Just remember: Applying for credit cards leads to inquiries into your credit report, which can adversely affect your score. To reduce the sting, see if the bank offers a prequalification service. You provide minimal personal information (usually just your address, name and the last four digits of your Social Security number), and the bank tells you if you’re prequalified for a card. This in no way affects your credit score, but it does serve as a great way to help you pinpoint the best card to apply for.
Though an affirmative prequalification doesn’t always mean you’ll ultimately be approved, at least this way you’ll know you’ve got a good shot.
The risks of instant-approval credit cards
All credit cards come with some level of risk. Harzog warns that there are a number of instant-approval cards on what she calls “the bad credit market.” With these lenders, as long as they can verify your identity, you’re good to go. This may sound amazing for consumers with bad credit, but Harzog advises wariness.
“You have to be really proactive in the way you protect yourself because while some are fine, many use high APRs and maintenance fees to really take advantage of people,” she says.
She points to First Premier as an example. The bank boasts 60-second approvals, but it also charges a $95 “Program Fee” to open your account. From there, consumers are hit with a 36% APR, along with an annual fee that could range from $45 to $125, depending on your credit limit. The lower your credit score, the more careful you need to be, according to Harzog.
Aside from sky-high interest rates and surprise fees, another inherent risk that comes with instant-approval credit cards has to do with the likelihood of overspending. Having to wait 10 days to receive a regular credit card is a built-in safeguard against impulse shopping. On the flipside, getting excited about an unplanned purchase — then having instant access to a ready-to-use line of credit — could be a recipe for financial disaster.
“Just be sure that the reason you need to have an instant-approval card works with your overall financial goals and is within your budget if you plan to start using it that day,” Harzog says.
$75-$125 annual fee the first year, then $45-$49 after that.
An awful deal, given the upfront and annual fees, not to mention the skyhigh ongoing APR. If you really need money fast, consider alternatives like a personal loan that doesn’t charge upfront fees.
You may have to make a down payment, depending on the credit program you qualify for.
We aren’t big fans of FingerHut, an online shopping catalog that lets consumers finance their purchases through one of its credit programs. You’re much better off going with one of the secured credit cards featured in the next section.
This is another one that has terrible fees . It makes a lot more sense to take the money you’d spend on these fees and put a deposit down on a secured credit card . The only way we can justify going with Total Visa is if you really cannot get approved anywhere else, and you really need to build credit. Even then, a secured card would be a better option.
The potential benefits of instant-approval credit cards
Like any other credit card, instant-approval cards, when used wisely, can help you out of a financial jam if you have no other quick financing options. This is especially true if you get a card that allows for cash withdrawals with limited or no fees.
And those playing the long game can actually use them to improve their credit score by keeping their utilization rate low and always making on-time payments.
But if you can’t find an instant-approval card with good terms, going with a secured credit card or prepaid debit card might be a better starting point, assuming you don’t need the spending power right this minute.
Instant-approval credit card alternatives
Let’s make one thing clear right off the bat: A secured card won’t be helpful to someone who needs to put a large purchase on credit right away, doesn’t have cash to fund a card and is looking for speedy credit-card approval.
But if you are looking for a solid way to build credit without going deeper into debt, a secured card is one of the best ways to accomplish that goal.
A secured credit card requires the cardholder to put down a cash deposit at the outset, essentially protecting the bank should you default on your debt. The deposit itself often dictates your credit limit; so putting down a $500 deposit translates to a $500 credit line.
Need more credit? Simply add more and you’re ready to roll. The setup is a roundabout way to build your credit or rehab a poor score (assuming you maintain a low utilization rate and pay the balance off in full each month) as your activity is reported to the credit bureaus.
If you are approved for a secured card, you’ll just need to make the minimum deposit, which varies from issuer to issuer. As your credit score gradually rises and you prove your creditworthiness, you may have the opportunity to request an upgrade to a regular credit card or your lender may bump you up to a regular credit card.
Remember, if the idea is to improve your credit, you’ll want to wait until your score hits the 650 mark before you consider making such a switch. That said, our experts recommend keeping a secured card active for at least one year if you want to see a tangible difference in your credit score.
Harzog adds, “Your score is considered, but they also look at your credit report to see if you have negative items, such as a recent bankruptcy; your income is also a factor.”
When it’s time to transition up, you can begin the process by reaching out to the bank directly to see what regular credit cards you qualify for. (Steer away from ones with annual fees, of course.)
If a secured credit card sounds right for you, check out these two noteworthy picks:
Fees and fine print
Can you convert to a regular card?
Capital One® Secured Mastercard®
$49, $99 or $200
26.99% (Variable) APR
Discover it® Secured
The Discover it® Secured offers decent rewards to cardholders, like 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. On the bright side, after eight months, Discover will start running automatic monthly reviews to see if you’re eligible for a unsecured card. To learn more, check out this in-depth MagnifyMoney review.
Capital One® Secured Mastercard®
The interest rate is super high on the Capital One® Secured Mastercard®, but again, this is a nonissue if you’re paying off the balance each month. Unlike with the Discover it® Secured, you can’t earn cashback rewards with this offering, but the minimum deposit may be lower, making it a more accessible secured credit card for someone looking to improve his/her credit. One other benefit: if you’re unable to pay the full deposit all at once, Capital One will give you 80 days of being approved to do so.
Prepaid debit cards
Getting a prepaid debit card is easy enough — simply use cash to load up the balance, and you’re set. They’re not the same as credit cards, but can be a good alternative if you don’t have access to a traditional checking account or just want an easy, cash-free way to access your money.
How do they work?
Since your payment history for a secured credit card is reported to credit bureaus, using one responsibly is a legit way to build up your credit. Not so for prepaid debit cards. Instead, you prepay the balance, then swipe away until you hit zero.
When are prepaid debit cards a good option?
“If you can’t get a checking account, for whatever reason, a prepaid card might help bridge the gap until you can get an account again,” says Harzog.
In other words, prepaid debit cards represent an efficient, simple way to manage your money. They’re also ideal for people who generally carry a lot of cash on hand, protecting them from theft. Another perk comes if you set up direct deposit so that your paycheck is funneled straight to your prepaid card. According to our insiders, some prepaid card issuers may credit your account with your payroll earnings a full two days early — a worthwhile perk if money is tight.
Just one other important note regarding prepaid debit cards: The fees can be killer. Some attach charges for everything from loading your card to using an ATM. One upside, however, is that the Consumer Financial Protection Bureau has recently tightened up rules for the prepaid debit card industry, issuing a slew of new consumer protections that will take effect next year.
“There are a few that have minimum fees, and these are good candidates,” adds Harzog. “For example, you might want to give your teen’s allowance via a prepaid card so the kid can get used to using plastic responsibly, but if they have a checking account, a debit card can accomplish the same thing.”
If you’re on the market for a prepaid debit card, they’re relatively easy to find. A number of large banks, like Chase and American Express, offer their own versions. You can also find different variations at retailers like Walgreens. Again, just be sure to triple-check the fine print so you know exactly what you’re signing up for.
Prepaid debit cards to consider
Comparing prepaid debit card options? Here are a couple worth mentioning and a few key fees for you to watch out for.
Replacement card fee
$0, unless you want same-day access to a check you deposit via mobile check capture; fee is equal to 1% or 5% of check value.
$0 at any MoneyPass® ATM. Otherwise, there's a $2.50 fee.
$0 at any Chase ATM, otherwise there's a $2.50 fee.
Bluebird by Amex
Bluebird is operated through a partnership between American Express and Walmart. As far as fees go, Bluebird stands out (in a good way). The card itself, which requires no credit check, is free if you purchase it online; it’ll cost you up to $5 if you go through a retailer.This card gives you plenty of ways to add funds free of charge, including direct-depositing your paycheck, which will get you access to your funds two days faster. You can also reload with cash at Walmart or go with a free debit card transfer. Mobile check capture is another free option.
For mobile deposit, you’ll have to wait 10 days to access your money, or you can get it in a matter of minutes if you’re willing to pay a fee equal to 1 or 5% of the check’s value (or a minimum of $5). We highly recommend sticking to the direct deposit option if you can.
A downside to Bluebird is that to avoid ATM fees, you have to use an ATM that’s within its MoneyPass® network. (You might want to check your nearest locations before opening an account.) Another snag is that cash back from retailers is off the table. You’ll also need to keep in mind that this is an American Express card, which isn’t as widely accepted as other major cards.
Chase Liquid is another prepaid debit card worth considering if you plan on reloading funds fairly often. This card lets you load checks and cash, for free, at any Chase ATM. You can also use direct deposit or transfer money from an eligible account. But unlike Bluebird, you can expect a few more fees with Chase Liquid.
You have to have one of Chase’s qualifying accounts, like Chase Premier Checking, to get away from the $4.95 monthly service fee. One other thing: you have to go to a local branch to open your account, so this card doesn’t make sense if there isn’t one in your area.
Instant-approval credit cards can be a great option for when you need credit now, assuming you don’t carry a balance and you go with cards that have reasonable rates and little to no fees. If that’s out of reach, secured credit cards are an effective way to build up your credit score until you qualify for better deals. As another option, a prepaid debit card is a solid starting point on the road to better money management.