Can I Get a Rewards Card With Bad Credit?

Bad Credit Isn't a Barrier to Earning Credit Card Rewards

A young woman looks over her shoulder while holding a credit card
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Bad credit can make opening new credit card accounts challenging but it's not impossible. (If you’ve got a FICO score below 580, that’s generally defined as poor credit.) You can get a rewards card with bad credit, which could help you raise your score while letting you earn cash back, miles, or points that can be used for travel. However, you’ll need to make sure that it doesn’t tempt you to spend more than you would otherwise.

Should You Get a Rewards Card?

A rewards card gives you the potential to earn cash back and could help you raise your credit score, which makes it a strong option for those looking to rebuild their credit.

While there are rewards credit cards you can get with bad credit, you'll have limited options. You also may not be able to get a credit card if you have too much debt, have applied for too many credit cards recently, a recent bankruptcy, or no bank account.

However, it's important to be vigilant about not overspending, while also managing your credit utilization to keep yourself debt-free. But, as with any card, there is the underlying possibility of getting a rewards card with a high-interest rate, so consider whether you can handle that before signing up.

Does it make sense to get a rewards card with bad credit? Weighing the pros and cons can help you determine whether it's the right move for you. 

Pros and Cons of Using Rewards Cards With Bad Credit

Pros

  • Good for rebuilding credit

  • Can earn cash back

  • Provides access to credit monitoring tools

  • Provides financial flexibility

  • Offers protection

Cons

  • Encourages excess spending

  • Possible higher interest rates

  • Limited card options to choose from

  • Must be wary of credit utilization

Pros Explained

Credit cards, in general, can make sense when you’re in credit-rebuilding mode, and rewards cards have one significant benefit: the opportunity to earn cash back on purchases. For example, a card might pay you 1% back on every dollar you spend. If you charge $1,000 to your card each month, you'd earn $120 in cash rewards in a year. If you redeem those rewards as a statement credit, it's like getting a 1% discount on everything you buy. 

More benefits of reward-card use when you have bad credit:

  • Some credit cards give you access to your free credit score and other tools for monitoring your spending and credit. For example, Chase’s Credit Journey includes a free credit score that refreshes weekly, alerts whenever there are important changes to your credit report, and provides a credit score simulator that shows you how things like paying off debt can change your credit score. This tool is free for anyone to use, but you may be more likely to use it if you’ve got an account. 
  • As with other types of credit cards, if you make on-time payments every month while maintaining low balances on your cards, the card can help you improve your credit score. 
  • A credit card can give you some flexibility. If you have an unexpected expense and your emergency savings fund won't cover it, you could charge it to your card. A rewards card can also come in handy if you’re renting a car. It can save you from having to put down a hefty deposit and meet other requirements if you pay with a debit card.
  • Credit cards offer greater protection against liability for fraudulent charges, compared to debit cards. For example, you’re only responsible for $50 in fraudulent charges at most with a credit card, while your liability for fraudulent debit card purchases may be unlimited, depending on when the fraud is reported.

Cons Explained

However, if you have bad credit and you’re rebuilding credit, you may not want to get a rewards card—or perhaps any kind of credit card—for a few reasons:

  • The main drawback of a rewards card when you have bad credit is that it may tempt you to spend more than you should just to rack up more points. If you think this describes you, you’re better off getting a different type of credit card for bad credit
  • Most cards for people with less-than-perfect credit come with higher interest rates than other credit cards. If you’re tempted to run up a balance, you will quickly end up paying more interest on your card than you’ll earn in rewards.
  • Your card options may be mostly limited to secured credit cards, depending on your credit score. Secured credit cards require a cash deposit to open, which is also usually your credit limit. While secured cards are a good way to build credit, if you don’t have the money for a deposit, you won’t be able to get one. 
  • Your initial credit limit may be low. You’ll need to aim to use no more than 30% of your credit limit at any given time because a low credit utilization rate is an important part of your credit score. Increasing your limit usually means increasing your deposit in the case of a secured card, so you'll need to come up with additional cash. If you default on a secured card for any reason, your deposit may not be refunded.

Before opening a secured rewards credit card, make sure the card issuer will report your account activity to all three major credit bureaus

Consider the Alternatives

If the cons outweigh the pros for you, know that a rewards card isn't the only way to rebuild credit. There are other things you can do to improve poor credit, including: 

  • Asking someone with a good credit score to add you to one of their credit accounts as an authorized user.
  • Taking out a small credit builder loan from your bank or credit union.
  • Paying bills on time, especially those that are reported to a credit agency. 
  • If you rent, ask your landlord or property management company if it reports rental payment data to a credit agency. If not, consider working with a rental payment service that does so.
  • Reviewing your credit report for errors and disputing ones you find. 

Bottom Line

If you decide to get a rewards card in the hopes of raising your score, remember to read the fine print carefully. Make sure you understand the rewards structure, fees, and interest rates so you know exactly what you're signing up for beforehand. 

Article Sources

  1. FICO. "Credit Scores 101: What's a Good Credit Score Range?" Accessed Nov. 17, 2019. 

  2. Avis. "Can I Rent a Car With a Debit Card?" Accessed Nov. 17, 2019.

  3. Federal Trade Commission. "Lost or Stolen Credit, ATM, and Debit Cards," Accessed Nov. 17, 2019.

  4. Experian. "How Does the Deposit in a Secured Card Work?" Accessed Nov. 17, 2019.

  5. Experian. "Build Credit History By Paying Your Rent On Time," Accessed Nov. 17, 2019.