I recently received this question from a Money Talks News reader:
I’ve been working hard to get my credit score up over the last several months, and my latest credit pull has me in the 640 range, which I’ve come to understand as “fair” through sites like yours. I’ve used a secured credit card to get my score up, but I’m ready to apply for a credit card that will give me cash back for my purchases. Are there cash-back credit cards available for people like me who have fair credit?
First, congratulations on the improvement in your credit score! That’s no small feat. The road back from poor credit can be difficult. Keep up the good work.
You’re correct that your current score puts you in the “fair” range, but credit card issuers use more than just your credit score when determining whether or not to approve you. The longer and more established your credit, the better your chances. And if you have an extended period of on-time, delinquent-free credit card payments, even better.
So while there’s certainly no guarantee your new and improved credit score will get you approved for plastic targeted at fair credit, it’s clearly going to improve your chances.
Now to answer your question: Yes, there are cash-back rewards cards available for consumers with fair credit. They’re not as good as those offered to applicants with perfect credit, but they’re a step up from the secured card you’re using now.
One example is the Capital One Cash Rewards card, offering 1 percent cash back on all purchases and a 50 percent bonus on the cash back you earn every year. That’s essentially 1.5 percent cash back on all purchases.
There’s nothing mind-blowing about this card. The cash-back rewards are simple and there are no bonus cash-back categories (e.g., 5 percent on groceries or gas). Like most cards in the fair credit category, the ongoing APR is on the high side, starting at a 19.8 percent variable. That might be higher than your current secured card. There’s also an annual fee attached to this card — $39.
Another potential positive with this card is the introductory period, which now offers 0 percent interest on new purchases through January 2014. And if you’re planning on taking it abroad, you’ll be happy to learn there are no foreign transaction fees. (Some cards charge 3 percent on all purchases made outside the U.S.)
Overall, this is a solid if not super cash-back credit card for consumers with fair to average credit.
A second option is the Barclaycard Rewards MasterCard for Average Credit. This card also has pros and cons, but provides a decent alternative to Capital One.
First, the good: a six-month 0 percent interest intro period for both new purchases and balance transfers. Plus, cardholders earn 2,500 bonus points simply for making their first purchase — that’s the equivalent of $25, according to Barclaycard. From there, cardholders earn 2 points on gas, grocery and utility purchases, and 1 point on everything else. There’s no annual fee.
Unfortunately, it’s not all roses. The ongoing variable APR is especially high, starting at 24.99 percent. And according to multiple credit card comparison sites online, this card is marginally more difficult to get approved for than the Capital One Cash Rewards card.
The bottom line
There are cash-back credit cards for consumers with fair credit. But while it’s nice to get cash back on purchases, fair credit cash-back cards aren’t as lucrative as those designed for good to excellent credit.
If you’re still unsure if you’re likely to get approved for an unsecured fair credit card, it might be worthwhile to hang onto that secured credit card for another six months and continue to build your credit score. The better your score and the longer your payment history, the more likely you are to receive approval for an even stronger cash-back card down the line.