What credit cards are actually available below 500
Credit cards marketed to people with scores under 500 exist, but they are not the same product as standard cards. Most require a cash deposit held as collateral — typically $200 to $2,500 — and that deposit becomes your credit limit. You pay interest on purchases just like any cardholder, but the bank keeps your deposit untouched as security against default. A few unsecured cards exist for this range, but they carry much higher interest rates and lower limits.
The cards you will find fall into two categories: secured cards (deposit required) and unsecured cards (no deposit, but stricter terms). Secured cards are more common and easier to get approved for because the bank's risk is lower. Unsecured cards at this score level typically charge 24% to 36% annual percentage rates and offer limits of $300 to $500.
Your score under 500 usually means you have missed payments, high debt relative to your limits, or a short credit history. Lenders see this as high risk, so the terms reflect that. The purpose of these cards is not to spend freely — it is to rebuild your credit history by making on-time payments over months or years.
Key Takeaways
- Secured cards require a cash deposit that serves as your credit limit, and most lenders in this range require deposits of $200 to $2,500.
- Your deposit stays in the bank's account untouched; you pay interest on what you charge, just like a regular cardholder.
- Unsecured cards for scores under 500 exist but charge 24% to 36% interest and offer limits under $500, making them more expensive than secured options.
- The goal of these cards is to build payment history over time, not to access credit for large purchases.
- After 12 to 24 months of on-time payments, many issuers convert secured cards to unsecured cards and return your deposit.
How secured cards work and what they cost
When you open a secured card, you deposit money into a savings account held by the card issuer. That amount becomes your credit limit. If you deposit $500, you get a $500 limit. The bank holds this money for the life of the account or until they convert the card to unsecured.
You then use the card like any other: make purchases, receive a monthly statement, and pay a bill. The interest rate on secured cards typically ranges from 18% to 25%, depending on the issuer and your specific approval. Annual fees are common — usually $25 to $99 per year — and some cards charge monthly maintenance fees of $5 to $10. Read the fee schedule carefully, because these add up quickly on a small limit.
The deposit itself earns little to no interest. Some issuers pay 0.01% annual percentage yield on the deposit; others pay nothing. You are not earning money on this account — you are paying for the privilege of rebuilding credit. After 12 to 24 months of perfect or near-perfect payment history, the issuer may convert your card to unsecured, return your deposit, and raise your limit. This is not automatic; you have to meet their criteria, which usually means no missed or late payments.
Unsecured cards for low scores and why they cost more
A few card issuers offer unsecured cards to people with scores under 500, meaning no deposit is required. The tradeoff is steep: interest rates of 24% to 36%, annual fees of $75 to $150, and credit limits of $300 to $500. Some charge monthly fees on top of the annual fee.
Because the bank has no collateral, they price the risk into the card itself. If you carry a $500 balance at 30% interest, you pay roughly $12.50 per month in interest alone. Add a $99 annual fee divided across 12 months, and you are paying $20.25 per month just for the privilege of holding the card, before you buy anything.
Unsecured cards make sense only if you cannot save a deposit for a secured card or if you need a higher limit when ready. For most people rebuilding from a score under 500, a secured card is the cheaper path. The interest rate is lower, the fees are lower, and your deposit gives you a concrete reason to keep the account open and active.
Where to find these cards and what to expect in the approval process
Banks and credit unions that offer secured cards include Chime, LendingClub, Capital One, and Discover. Credit unions sometimes offer secured cards to members with lower fees and more flexible terms, so check whether you have access to a local credit union. Online banks like Chime and LendingClub often have faster approval and lower deposit minimums than traditional banks.
The approval process is usually quick — often same-day or within 24 hours — because the bank is not taking much risk. You will need to provide your Social Security number, proof of income or employment, and a valid ID. Some issuers ask about your reason for the card or your plan to rebuild credit, but most do not. A few may do a soft credit pull, which does not affect your score.
Once approved, you transfer your deposit to the bank, and the card arrives within 5 to 10 business days. You can begin using it when ready. Start with small purchases — $20 to $50 — and pay the full balance before the due date. This builds a record of on-time payments, which is what lenders look at most closely when deciding whether to convert your card or offer you better terms later.
How these cards affect your credit score
Opening a secured card does a few things to your score in the short term. A hard inquiry (if the issuer does one) may lower your score by a few points. A new account also lowers your average account age, which can drop your score by 5 to 10 points initially. These dips are temporary.
Over the following months, the card helps your score by adding to your payment history — the largest factor in your score — and by lowering your credit utilization ratio if you keep your balance low. If you charge $100 on a $500 limit and pay it off each month, you show 20% utilization, which is healthy. This combination of on-time payments and low utilization can raise your score by 50 to 100 points over 6 to 12 months, depending on what else is on your report.
The key is consistency. One missed payment can erase months of progress. Set up automatic payments for at least the minimum, or set a phone reminder to pay before the due date. The goal is to show lenders that you can be trusted with credit, and that only happens through repeated, visible proof.
Comparing secured cards: deposit size, fees, and conversion terms
| Feature | What to Look For | Why It Matters |
|---|---|---|
| Minimum deposit | $200 to $500 range | Lower deposits are easier to save; higher deposits give you more credit room to build history. |
| Annual percentage rate | 18% to 22% | Lower rates mean less interest paid on balances you carry; even 2% difference costs $10 per year on a $500 balance. |
| Annual fee | $0 to $50 | Some issuers waive annual fees for the first year; others charge $99. This is a direct cost with no benefit. |
| Monthly maintenance fee | $0 to $10 | Monthly fees add up fast; $5 per month is $60 per year, which is significant on a small limit. |
| Conversion timeline | 12 to 24 months | Shorter timelines mean you get your deposit back sooner; longer timelines keep your money tied up longer. |
| Conversion criteria | No missed payments; on-time history | Some issuers are strict; others convert automatically after 18 months. Ask before you open the account. |
Mistakes to avoid when using a secured card
The most common mistake is treating the card like a loan. A secured card is not a way to borrow money against your deposit — it is a way to build credit. If you think of it as a loan, you will be tempted to charge large amounts and pay them back slowly, which costs you interest and defeats the purpose. Instead, charge small amounts you can pay off in full each month.
Another mistake is opening multiple secured cards at once. Each new account triggers a hard inquiry and lowers your average account age. Opening two or three cards in a month can drop your score by 30 to 50 points. Open one card, use it successfully for 6 to 12 months, and then consider a second card if you need more credit room.
A third mistake is ignoring the card after you open it. If you charge nothing and pay nothing, the card does not help your score. Lenders want to see activity and on-time payments. Use the card for small, regular purchases — gas, groceries, a subscription — and pay the bill on time every month. This creates the payment history that raises your score.
Alternatives if a secured card does not work for you
If you cannot save a deposit, a few other paths exist. A credit builder loan, offered by many credit unions, lets you borrow a small amount ($300 to $1,000) that the lender holds in a savings account. You make monthly payments, and after you pay off the loan, you get the money back plus interest. This costs less than a secured card and builds the same payment history.
Becoming an authorized user on someone else's credit card is another option. If a family member or friend with good credit adds you to their account, their payment history and low balance may help your score. This does not cost you anything and does not require a deposit, but it only works if the primary cardholder keeps the account in good standing.
A third option is to wait and rebuild through other means — paying down existing debt, disputing errors on your credit report, or letting negative marks age off your report. This takes longer but costs nothing. After 7 years, most negative marks fall off your report, and your score begins to recover on its own. If you need credit sooner, a secured card is usually the fastest path.
Frequently Asked Questions
Can I use a secured card to make large purchases?
Technically yes, but it defeats the purpose. If you deposit $500 and charge $500, you have no room to show consistent payment history. Use the card for small, regular purchases you can pay off monthly. This builds a track record that raises your score faster than one large purchase.
What happens to my deposit if I miss a payment?
The bank does not automatically take your deposit. Instead, they treat the missed payment like any other credit card default: it damages your credit score, may trigger late fees, and could lead to the account being closed. Your deposit remains in their account unless you default so severely that they explore it to your debt.
How long does it take to convert a secured card to unsecured?
Most issuers convert after 12 to 24 months of on-time payments. Some do it automatically; others require you to request it. Check your card's terms before you open it. After conversion, your deposit is returned and your limit may increase based on your payment history and income.
Will opening a secured card hurt my credit score?
Yes, initially. A hard inquiry and new account will lower your score by 5 to 15 points. But over 6 to 12 months of on-time payments, the card will raise your score by 50 to 100 points or more, depending on what else is on your report. The short-term dip is worth the long-term gain.
Can I have both a secured card and an unsecured card at the same time?
Yes, but it is usually not necessary. Start with one secured card and use it successfully for 6 to 12 months. After your score improves, you may be offered unsecured cards with better terms, or you can request a second card if you need more credit. Opening multiple cards at once damages your score more than it helps.