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Household Bank: 2% Cash Back on a Pre-Approved Credit Card?

July 11, 2011
Credit Cards, Credit Cards for Bad Credit
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If you have bad credit, the Household Bank credit card is an amazing deal: 2% cash back on a credit card for bad credit is unusual enough, but Household Bank offers the same deal on its secured Household Bank MasterCard. Household follows in the tradition of its parent company HSBC’s subsidiary, Orchard Bank. Both lenders go out of their way to help those with bad credit to rebuild their credit histories without paying exorbitant fees or interest rates. Unlike other banks who try to prey on those with low FICO scores, Household Bank and Orchard Bank offer clear and reasonable terms.

Update: Though the Household Bank credit card 2% cash back offer has expired, a number of solid options still exist for those with bad credit. In particular, we recommend the Capital One Secured card for its small security deposit and low annual fee.

2% back on a card for bad credit

The Household Bank credit card’s offer is unusual for bad credit offerings: to start with, it offers pretty substantial rewards, the kind you usually see with good or excellent credit. It gives a flat 2% on all purchases, redeemable for cash or gift cards. The annual fee is pretty darn reasonable: $0 or $39. There’s no processing fee, unlike the other Household Bank MasterCard offer. The card offers 0% interest on purchases for 9 months, and after that, a variable rate of 19.9% (prime + 16.65%).

There are a couple other, less obvious benefits. Firstly, the rewards are surprisingly easy to redeem. You earn 2 points per $1 spent, and can redeem 500 points for a $5 gift card or 2,500 points for $25, far lower than Citi ThankYou points, which require you to accumulate 10k before getting the full value. Plus, the cash advance APR is only 20.9% (as of this writing), while that of the comparable Capital One Secured MasterCard is 24.9%.

2% cash back on the secured card, too

Pretty much no other secured credit card, as of this writing, offers 2% cash back. The Household Bank Secured Rewards MasterCard gives the same 2% offer as the unsecured, and has an annual fee of $35 that’s waived the first year. Again, unlike the Orchard Bank cards, there’s no processing fee. The minimum deposit, equal to the credit limit, can be anywhere between $200 and $15,000, and anyone who can make the deposit is accepted regardless of bankruptcy status or FICO score. The favorable terms, high rewards rate and relatively high accessibility make the Household Bank Rewards MasterCard among the top of the easy credit cards to qualify for.

Two secured cards offer cash back, but both offer 1% back and have restricted eligibility. The Capital One for Newcomers offers 1% back and easy redemption, but it’s only available for recent immigrants who have yet to build a credit history. The APR’s also a lot higher: 24.9%, more than 3x the Household Bank Secured. The other 1% back secured card is the Navy Federal nRewards Secured, which requires you to accumulate 7,500 points to redeem at full value, and is only open to employees of the Department of Defense and their families. The non-HSBC secured cards we tend to favor are the Capital One and Citibank Secured, which have APRs of 18.24% and 22.9%, respectively, and annual fees of $29 that are not waived in Year 1. Compare that to the Household Bank credit card, which has a variable APR of 7.9% after a 9-month zero interest period.

Household Bank is credit score-friendly

We said above that Household and Orchard Bank go out of their way to help those with bad credit. Here’s another example. Your FICO score incorporates how many credit card companies asked about your score lately, but it differentiates between ones that you initiated by applying for a credit card (which count against you) and ones that credit card companies do without your knowledge to pre-approve you (which don’t count against you).

For all of the Household and Orchard cards, when you “apply” for the credit card, you basically ask Household/Orchard to pre-approve you. Since you’re not initiating the request, it won’t ding your credit score. That way, when the bank asks about your credit score, they can tell you whether you’ll qualify for an unsecured credit card or will only qualify for a secured one. But unlike almost any other credit card, you can apply with no risk of hurting your credit score.

The veteran Household Bank cards

The original unsecured Household Bank MasterCard offered more or less the same deal as its Orchard Bank counterpart: an annual fee of $59 that’s lowered to $29, a $39 processing fee that combined with the first-year discount makes for an effective fee of $68, and a fairly low variable APR of 14.9%-19.9%. That’s a substantially lower interest rate than most credit cards for bad credit, which average around 24%.  The secured MasterCard has an annual fee of $35, waived the first year, again like its Orchard Bank counterpart.

Household Bank is among the best options for those with bad credit, since, well, they won’t try to screw you. It’s depressingly common to see credit card companies try to trick you with “gotcha” fees or advertise cards that, buried deep in the disclosures, the issuers admit aren’t actually credit cards. We’d like the cards solely on the basis of honesty, but the 2% cash back deal is good – unheard-of good.