I am a new college graduate with a full time job, but I have bad credit. What card is best for me? How do I avoid paying outrageous interest rates?

By , CardRatings contributor
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First of all, there are three ways to avoid paying any interest on a credit card.

  1. The first method is to pay off any debt that you charge in full each month prior to the due date. This means you never carry a balance on your credit cards.
  2. A second way to avoid paying interest charges is to obtain a card with a teaser rate of 0 percent, so that for a set period of time, you pay no interest on any charges or purchases you make.
  3. A third alternative is to do a 0 percent credit card balance transfer, though these deals also last for only a limited term.

The sticking point for you may be that most low-APR cards require good to excellent credit.

Finding the best credit card

You say you have bad credit, but you don't want to pay "outrageous" interest rates. Well, the reality is, depending on how bad your credit really is, you may be stuck with very high rates of perhaps 20 percent APR or higher. It really depends on your credit rating. So the first thing you should do is get a sense of the true condition of your credit. Maybe it's not as awful as you think.

The only way to know for sure is to check your credit reports from the big three credit bureaus, Equifax, Experian, and TransUnion. You can get all three reports free of charge at AnnualCreditReport.com.

You should also check your FICO credit score, which can range from 300 to 850 points. The higher your score is, the better a lending risk you are deemed to be. The lower your credit score, the worse off you are doing from a credit-scoring standpoint.

If you have truly bad credit, like you think that you do, it may be the case that you can't qualify for a traditional, unsecured credit card at all. Or if you are able to get one, you may get stuck with a subprime card that carries those "outrageous" rates you're trying to avoid.

Consider a secured credit card

An alternative strategy to getting an unsecured card is to seek out a secured credit card, which is a true credit card that requires you to prepay part of your credit line up front. Look for one with a low minimum deposit to get started, a low annual fee, and reports your payment history to the credit bureaus, to help you start rebuilding your credit rating. Good luck!


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