High Interest, Low Balance: Subprime Credit Cards Compared

If you have bad credit and want to rebuild it, you'll run into a whole category of cards built for exactly that: low credit limits, high annual fees, and high APRs. Two of the most common — the Credit One Bank Platinum Visa for Rebuilding Credit and the Milestone Mastercard — are worth looking at closely, because what they cost isn't always obvious up front.

The big question with any of these cards is the same: does the cost of the card outweigh what it does for your credit?

Credit One Bank Platinum Visa for Rebuilding Credit

At first glance it looks like a strong deal: it's unsecured (no security deposit needed) and it earns cash back on everyday purchases. But the APR is very high, and the annual fee can climb close to what you'd pay on a premium rewards card. It can work as a short-term, no-deposit option — but a secured card is often a more sustainable long-term choice if your goal is fair or good credit.

Quick highlights

• Rewards rate: 1% cash back on eligible gas, groceries, mobile phone service, internet, and cable/satellite TV (terms apply).
• Welcome offer: none.
• Annual fee: $75 the first year, then $99 ($8.25 per month).
• Intro APR: none.
• Regular APR: 28.74% (variable).
• Recommended credit score: bad to fair (300–670).

The pros

• Earns cash back in several common spending categories.
• Gives people with bad credit a decent unsecured limit without a deposit.
• Includes possible credit-limit increases for accounts in good standing.
• Comes with the Credit One More Rewards program, which can boost your cash back.

The cons

• A high annual fee that increases in the second year, even if you pay on time.
• You might get a larger limit by opening a secured card with a deposit greater than $300.
• Limited cash back compared to some other credit-building cards.
• The optional Credit Protection Program can be more of a risk than a protection.

Why the annual fee matters so much

Because the rewards rate is only 1%, the annual fee can swallow any cash back you earn — especially in the second year. To offset the $8.25 monthly fee with rewards alone, you'd need to spend at least $825 a month ($9,900 a year) in eligible categories. For a card aimed at people rebuilding credit, that's a lot of spending just to break even.

How a secured card compares

When you have bad credit, the first decision is whether you want a secured or unsecured card. Secured cards require a refundable deposit, but they often come with fewer fees and more credit-building features.

• The Discover it Secured card charges no annual fee, matches all the cash back you earn in your first year, and reviews your account starting at 7 months to see if you can move to an unsecured line and get your deposit back. It requires a $200 minimum deposit.
• The Capital One Platinum Secured card charges no annual fee and can open a $200 credit line with a deposit as low as $49 — a strong option if you can't put down hundreds of dollars.

Both require a deposit the Credit One card doesn't. But over time, getting a refundable deposit back beats paying a non-refundable annual fee every year.

Milestone Mastercard

The Milestone card comes in several versions, and you won't know which one you'll get until you complete the application. You may be offered:

• Milestone Mastercard — 300 (annual fee: $35)
• Milestone Mastercard — 301 (annual fee: $75 the first year, $99 thereafter)
• Milestone Mastercard — 322 (annual fee: $59)

Pre-qualification doesn't trigger a hard inquiry, so checking won't lower your score. A $35 annual fee isn't unreasonable for an unsecured card for bad credit — but you might only qualify for the more expensive versions, and there are no-annual-fee options out there for limited credit.

The costs may not stop there

Beyond the three cards above, around 20 more versions of the Milestone card exist, offered directly or on certain websites — and they can differ wildly:

• Some have annual fees as high as $175 in the first year.
• Some have APRs as high as 35.9%.
• Some charge monthly "maintenance fees" that can add up to $150 a year, on top of the annual fee.

Whatever version you have, note that spending over your limit can trigger an overlimit fee of up to $40 — though Milestone says you can't be charged it unless you opt in to "overlimit coverage."

Credit limits are low

For all three Milestone cards offered directly, the credit limit is $300 (other versions can go up to $1,000). And the annual fee eats into that limit: with a $300 limit and a $75 first-year fee, your effective limit is $225 until you pay the fee off. That puts your credit utilization — a major factor in your score — at 25% right out of the gate. Experts recommend keeping utilization at 30% or lower.

A few positives

• No security deposit required (it's an unsecured card).
• It's a Mastercard, so it works anywhere Mastercard is accepted.
• It reports to all three major credit bureaus, so it can help you build credit.

One tip: if you want to cancel, you have to notify the issuer. Just putting the card in a drawer isn't enough — an active, unused card still gets charged the annual fee. If you cancel before using it, Milestone will refund the annual fee.

The bottom line

Cards like these can help you build credit, but they aren't cheap, and the fees can outweigh the benefit. Before you apply, do the math on the annual fee against the rewards, look hard at the APR, and compare a secured card. A refundable deposit you get back often beats a non-refundable fee you pay every single year.

Source: ratings and card details collected independently by Bankrate.com and NerdWallet; card terms have not been reviewed or approved by the issuers.