Best Store Credit Cards For Bad Credit Of May 2024 (2024)

Forbes compared several options to find and rank the best store cards for bad credit to build up their credit or looking to rehabilitate damaged credit.

Factors considered include:

• Approval odds
• Earnings rates
• APR
• Fees
• Consumer benefits

Forbes Advisor rates cards both as stand-alone products (the card rating on the review) and compared to others in a specific use case (the card rating you see on a specific “Best” list). The rating for each card changes on different “Best” lists according to how a person looking for a card in that category may value certain card features.

Read more: How Forbes Advisor Rates Credit Cards

Fingerhut Credit Account

Fingerhut doesn’t offer credit cards per se, but rather a marketplace with installment loans to purchase items on its website. This option can be helpful in the early stages of building your credit or helping repair damaged credit, as Fingerhut reports to all three major credit bureaus.

Rewards: This account does not earn rewards.

Welcome offer: This account does not have a welcome offer.

Annual fee: This account does not have an annual fee.

Other benefits and drawbacks: There are no fringe benefits with a Fingerhut account beyond the ability to build credit from the ground up. Fingerhut Fresh Start extends a small amount of credit for one purchase, with a downpayment of $30 with six to eight monthly payments as terms of repayment, with a relatively high APR. Fingerhut Fetti will extend you a larger credit line for multiple purchases, in a more traditional credit account fashion, and will require monthly on-time payments. After just three consecutive on-time payments, you may receive a credit line increase.

Keep in mind that the APR is rather high so ensure you’re only charging what you can repay in full according to the terms. Just like credit cards, late payments are reported to the credit bureaus and will damage your credit.

Pros

• Low credit limits. Lower credit limits tend to discourage out-of-control spending. Keeping your max spending low can ensure you’re able to make payments, which can help those with bad credit rebuild their credit.
• Better likelihood of approval. As these cards are targeted to those with bad credit, they provide better chances of credit.
• Improved credit. By making on-time payments, creditors will report your positive credit behavior to credit bureaus. Together with keeping your account open and in good standing and ensuring a low balance, your credit score is likely to improve. Keep in mind that other credit accounts will also be factored into your score.

Cons

• Low credit limits. Although that can be positive, low credit limits may prove too restrictive, not allowing you to cover larger purchases. This impact is often limited with store cards since spending with a single merchant is often lower.
• Higher credit utilization. Credit utilization is the percentage of available credit that you are currently using. A high credit utilization can lower your credit score. This is especially important with low credit limits. For instance, if your credit limit is $200 and you charge $100, your credit utilization is already 50%. Experts recommend staying under 30%.
• Potential credit impact. While store cards can help improve your credit, if you make late payments or charge more than you’re able to cover, they may further damage your credit and lead to high interest costs.

The two most common types of store cards are open- and closed-loop cards, also known as in-network and out-of-network cards. Open-loop cards, sometimes called in-network or co-branded, will usually have a Visa, Mastercard, American Express or other major card issuer logo stamped on them and can be used anywhere the issuer’s cards are accepted. An out-of-network card, also known as a closed-loop or store-only card can only be used at the store associated with it.

There may be times where you apply for an open-loop card, but are offered a closed-loop card instead. This may happen because the bank does not feel that your credit qualifies for an open-loop card, but does feel you qualify for some credit.

Closed-loop cards normally impact credit and appear on credit reports in the same way open-loop cards do. Many store cards behave like a credit card, but not all do. Some cards offer “special financing,” also known as a deferred interest plan. It’s important to read the fine print when it comes to these offers. Cards that promise no interest if the balance is paid in full during the introductory offer often come with an expensive clause–-if you fail to pay the full balance within the promotion period, you may owe the entire interest amount from the date of purchase.

Shopping for a credit card can be overwhelming. To make the process easier, Forbes Advisor maintains a number of guides to help consumers define terms, understand credit and how banks and other lenders advertise financial products:

• What Makes Up a Credit Score?
• What Is a Credit Report?
• Credit Utilization, Explained
• How to Build Better Credit

Choose a credit card carefully—especially if you’re starting to build credit—as you’ll want to keep your first credit card account open as long as possible for the benefit account longevity will have on your score.

If you need to rebuild your credit but you’re not convinced a store card is the best option, consider a secured card or a student card, which may help rebuild credit without the high rates and hidden fees many store cards are infamous for.

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