If you have bad credit, you’ll often be urged to get a secured credit card. These cards require a cash security deposit, usually equal to your credit limit. The First Premier Bank Credit Card is one of the few unsecured credit cards designed for people with bad credit, meaning you can skip the deposit.
But even though tying up money in a secured card deposit isn’t ideal, the cost of carrying the First Premier Bank Credit Card is so high that a deposit pales in comparison. And unlike a deposit on a secured card, which you get back when you close or upgrade the account, the fees you pay to First Premier are gone forever.
Because of the high fees and annual percentage rate, we recommend that you avoid the First Premier Bank Credit Card, but a couple of alternatives may be worth your while.
Why the First Premier card is so costly
When you have bad credit, a higher APR and extra fees are not uncommon. Card issuers see you as a higher risk and will charge you accordingly. But the First Premier card takes these charges to a new level.
The fees include processing fees, annual fees and monthly servicing fees, which vary depending on the credit limit you have. The day we looked at the terms and conditions, the credit limits ranged from $300 to $1,000 (see table below).
The fee parade begins with a one-time processing fee, which must be paid before the account is opened. Next comes the annual fee. Bringing up the rear is a monthly servicing fee, waived the first year for credit limits up to $500. For example, a $300 credit limit will run you a total of $170 the first year and $120 a year thereafter. Some of the best rewards credit cards don’t even charge that much. See the chart below for details on each credit limit. Also, if you want a cash advance, you’ll pay 5% or $6, whichever is greater. Here’s how the fees break down based on your credit limit:
|Credit limit||Processing fee (paid before account opens)||Annual fee||Monthly service fee|
|$300||$95||$75 first year, then $45 annually||$0 first year, $75 annually thereafter (billed $6.25/month)|
|$400||$95||$100 first year, then $45 annually||$0 first year, $75 annually thereafter (billed $6.25/month)|
|$500||$95||$125 first year, then $49 annually||$0 first year, $124.80 annually thereafter (billed $10.40/month)|
|$600||$75||$79 first year, then $49 annually||$70.20 first year (billed $5.85/month), then $99 annually (billed $8.25/month)|
|$700||$55||$79 first year, then $49 annually||$96 first year (billed $8/month), then $124.80 annually (billed $10.40/month)|
|$1,000||$25||$79 first year, then $49 annually||$96 first year (billed $8/month), then $124.80 annually (billed $10.40/month)|
While most credit cards for bad credit from major card issuers have comparatively high APRs, none of them come close to the First Premier Bank Credit Card’s APR of 36% for purchases and cash advances. (For cash advances, you’ll pay the 5% transaction fee noted above and the 36% APR.) Carrying a balance on this card can get you into financial trouble quickly.
Costly credit limits
Credit cards for bad credit tend to have low credit limits. When your limit is only $300, for example, you don’t have much room to use the card — and when you do use it, you can easily use up most of your available credit, causing your credit utilization ratio to spike and potentially hurting your credit score. This is a consideration with most cards for bad credit. But First Premier throws in an extra hassle: The bank may increase your credit limit after your account has been open for 13 months — but it will charge you a fee of 25% of the increase upon approval. For example, if you receive a $200 credit limit increase, you’ll be charged a $50 fee. Cardholders may reject the credit limit increase and have the fee reversed, but they must notify First Premier within 30 days of the billing statement that shows the increase and the fee.
In most cases, a secured credit card is a good choice while you’re getting back on your feet credit-wise. The downside to secured cards is the deposit. Although this means you’ll have some cash tied up while you’re using the card, you’ll typically get it back when you close the account, sometimes with interest. Here are two secured cards worthy of consideration.
Digital Federal Credit Union Visa Platinum Secured Credit CardDigital Federal Credit Union Visa Platinum Secured Credit Card proves that a credit card for bad credit doesn’t have to bleed you dry. The ongoing APR is 12.00% Variable, and the card is largely fee-free: The annual fee is $0, and there are no processing or servicing fees.
The card also offers free access to your FICO credit score so you can keep an eye on your credit-building progress and see what you still need to work on. The card also reports your activity to all three credit bureaus.
Though the Digital Federal Credit Union Visa Platinum Secured Credit Card does require you to put up a security deposit equal to your credit limit, there’s no limit to how high you can go. So if you happen to have $5,000 in savings you don’t need for a while, you can get a $5,000 credit limit.
One downside to the card is that you have to be a member of Digital Federal Credit Union to be approved. You may become a member if:
- Someone you are related to is a current member
- The company you work for or retired from is a participating employer
- You belong to a participating organization (you can join one of the listed organizations when you open your account with as little as $10)
- You live, work, worship or attend school in a community which has been designated as underserved and the credit union has a branch in it
Despite the extra hoop to jump through to apply, the Digital Federal Credit Union Visa Platinum Secured Credit Card is about as good as it gets.
Open Sky SecuredOpen Sky Secured may surprise you. The card doesn’t require a credit check to apply, and the annual fee is $35, which is relatively low.
Your credit limit, which requires an equal security deposit, can be anywhere from $200 to $3,000. The ongoing APR is 18.14%, and the card reports your activity to all three credit bureaus. For cash advances, you’ll pay $6 or 5%, whichever is greater.
The Open Sky Secured isn’t as impressive as the Digital Federal Credit Union Visa Platinum Secured Credit Card, but considering it won’t deny you simply for having poor credit, it’s not a bad option.
Tending to your credit doesn’t have to be expensive, and even with bad credit, you have options. Before you apply for any credit card, review the fees and other terms of the account and compare them with other cards. The more time you spend researching, the more likely you’ll come to the best option available for you.