Finding The Best $500-Limit Credit Cards In 2021
Sarah Sharkey5-minute read
May 07, 2021
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If you’re on a mission to improve your credit score, getting a credit card is a great place to start.
However, if you want to avoid the temptation of a high credit limit or you simply can't get approved for a higher credit line, a low-limit credit card can be a great way to build your credit without having to worry about overspending.
Wondering which card is best for your credit-building goals? We’ve uncovered the best credit cards to start your search.
Benefits Of Having A Credit Card
If you use a credit card responsibly, you can increase your credit score, often significantly.
When people talk about credit scores, they're typically referring to the FICO® scoring system. Your FICO® Score is a number ranging from 300 – 850. FICO® Scores are the most commonly used method for creditors to determine whether to approve or deny a credit applicant.
The higher your score, the more likely you are to be approved and to get the best rates.
Your FICO® Score will be based on information from your credit report, which is maintained by the three major credit bureaus: Experian™, Equifax® and TransUnion®.
Working to build your credit history and achieve a better credit score is an important part of getting your personal finances on track. Having good credit can make you more likely to be approved for auto or home loans, get you better interest rates, make your apartment search easier and even get you better car insurance rates.
Plus, using a low-limit credit card to build your credit will help pave the way for you to get a card with a higher limit.
Credit cards give you spending power that you might not otherwise have. Though you should carefully budget, if you have an unexpected expense and no cash saved for emergencies, a credit card can serve as a last resort to cover emergencies quickly.
Another great benefit of credit card ownership? Rewards. Many credit cards offer worthwhile rewards programs. Whether you prefer cash back rewards, discounts or travel points, there’s a card out there for you.
Credit cards also offer a convenient and often safer way to pay for your everyday expenses, as credit cards come with certain consumer protections that you might not be able to get with other forms of payment such as cash or debit card. This is especially important with online shopping.
Plus, if you ever want to rent a car, you'll generally need a credit card to do so.
Understanding Credit Card Limits
Not sure what exactly it means to have a high- or low-limit credit card? Let's quickly go over the basics.
Credit cards are a type of revolving credit. This means that instead of a typical loan, where you get a lump sum that you pay back in installments, you're extended a line of credit by your credit card company. You'll then be able to borrow from this credit line, paying back what you owe each month.
However, that doesn't mean you have an unlimited amount of money you can borrow. Credit card issuers will put a limit on how much you can spend to help ensure that you don't end up owing more than you can afford.
Your credit limit will be determined by your card issuer, and how high or low it is will typically depend on your credit score and your income. When you're first approved for a card, you might start with a lower limit, which could be anywhere between a few hundred dollars to a couple thousand.
Once you hit your limit, you won't be able to continue to make purchases using your card until you pay back a portion of what you owe.
According to Experian, the average consumer has a total credit limit of $31,015 across all their credit cards.
Top-Rated Credit Cards With Low Credit Limits
If you’ve avoided credit cards until now, a $500 limit (or something similar) is the perfect way to get your feet wet. Restricting yourself to a lower limit can be a great, low-pressure way to get started with credit cards.
If your credit is less than stellar or you have a limited credit history, a low-limit card may be your only option, as credit card companies typically won't offer higher limits to those who haven't yet proved their creditworthiness.
If you’re looking for a card with a relatively low limit of $500, you have plenty of choices. Here are a few of the best credit card deals.
Citi® Double Cash
If you want one of the best cash-back credit cards available, look no further. Credit limits for the Citi® Double Cash card start at $500.
The available APR for this card ranges between 13.99% – 23.99%. Your exact interest rate will be based on your credit score.
This card has no annual fee.
You’ll be able to earn 2% cash back on all purchases. Here’s how it breaks down:1% is earned by making the purchase, and 1% is earned by paying it off. That’s like a built-in coupon every time you shop.
If you're in need of a good balance transfer card, this is it. The Double Cash card offers an intro APR of 0% for balance transfers for the first 18 months, after which it will convert to the regular APR used for purchases.
If you hate fees, the Citi Simplicity® card might be the way to go. You can avoid late fees, penalty interest rates and annual fees with this card. Interest rates range between 14.74% – 24.74%.
Looking for a card with a 0% introductory rate on purchases? The Simplicity® card offers a 0% intro APR on purchases for 12 months.
It's also another great card for balance transfers, with a 0% introductory period that lasts a whopping 21 months.
If you're looking for a solid rewards card, you may want to check out some of the others on this list. But if you want a low-limit card with the goal of making on-time payments increasing your credit score, this card could work for you.
Bank of America® Cash Rewards
For those who are looking to maximize their cash back rewards, this card is a good option. It offers lower spending limits with access to many incentives.
This card offers an intro APR of 0% for your first 15 billing cycles, after which interest rates range between 13.99% – 23.99%. Plus, no annual fees.
The cash back opportunities with this card are worthwhile. You can earn 3% cash back in a category of your choosing, 2% at grocery stores and 1% on all other purchases. With this card you can strengthen your credit score while earning cash rewards.
Chase Freedom Unlimited®
The Chase Freedom Unlimited® card offers some cardholders a $500 limit without any annual fees.
The card offers interest rates between 14.99% – 23.74%, though you'll get an intro APR of 0% on purchases for your first 15 months.
With this card, you'll get unlimited 1.5% cash back on every purchase you make.
Capital One® Platinum
Capital One® Platinum is light on perks, but is good for those looking for a low-limit card to help them build a good credit score. This card has no annual fee.
With a steep APR, it’s important to manage this card carefully and avoid the high interest rate by paying off your balance in full each month.
Though this is a fairly bare-bones card, with no rewards or cash back program to speak of, it still makes our list for being a solid option for those whose credit scores might not make them eligible for some of the more rewards-heavy options.
Discover it® Cash Back
Discover's popular "it" card comes in a few different iterations, including a travel card, a gas and restaurant cash back card and even a version for students looking to begin their credit-building journey. However, if you're looking for a solid, well-rounded cash back card, the Discover it® Cash Back is the way to go.
This card offers 5% cash back on purchases at a revolving set of retailers. Each quarter comes with new categories eligible for the 5% cash back, such as grocery stores, gas stations or restaurants.
Plus, even if you miss out on this quarter's category, you'll still earn 1% cash back on all your other purchases. And at the end of your first year, you'll receive a cash-back match on the cash back you've earned.
There's no annual fee and you get a 0% intro APR for 14 months on both purchases and balance transfers. Regular APR is between 11.99% – 22.99%.
Store Credit Cards
If no other card is a good fit, retail store cards are something worth looking into. Many stores offer credit cards with lower limits. Often, these cards are more accessible to those who are still building their credit.
If you shop at a particular store a lot, getting their store credit card can be worthwhile depending on the types of discounts or perks the card offers.
However, there are some common pitfalls with store cards that you should be mindful of. Often, these cards can come with higher-than-average APRs, meaning that they can get expensive if you carry a balance on them.
Additionally, with so many robust rewards options available from regular credit cards, it might make more sense to get a card that offers rewards or cash back no matter where you shop.
Secured Credit Cards For Bad Credit
If you're having trouble getting approved for any credit cards, it may be that your credit score is too low or you don't have a long enough credit history. In this case, you may have to start with a secured credit card.
All of the cards we've mentioned above are unsecured credit cards. With an unsecured card, you don't put anything down to "secure" the debt. If you stop making payments on an unsecured card, there's nothing for the credit card company to hold as collateral to recoup some of their losses.
This makes unsecured cards riskier for creditors, which is why you typically need a good credit score to help minimize their risk.
Secured credit cards offer a way for you to prove yourself. To get a secured card, you'll make a refundable security deposit, typically between a couple hundred to a couple thousand dollars. That deposit becomes your credit limit.
The deposit reduces the risk for the card issuer because it's your money on the line, not theirs, if you stop paying.
Often, you'll have the ability to convert your secured card into an unsecured card if you keep your account in good standing (meaning no late payments) for a certain amount of time. Once your card is converted, you'll be able to get your deposit back.
Student Credit Cards
College students don't typically have extensive credit histories (other than their student loans), which can be a hindrance when trying to build credit. Luckily, student credit cards make getting started with a credit card a little easier, as they typically come with less-strict approvals.
Our pick for student cards? Check out the Discover it® Student Cash Back card. Not only does it have great terms for a starter card (no annual fee, 0% intro APR for 6 months, 12.99% – 21.99% standard APR), it offers the same reward structure as the regular Discover it® card, plus an annual "good grade reward."
Criteria To Consider When Choosing A Card
As with any important financial move, be sure to read all of the fine print and consider all of the pros and cons before making a decision.
Look for cards with no annual fee. Though some cards with annual fees can be worthwhile, if you're looking to keep your balance low and build credit, it might not make sense to have a card that you have to pay just to own.
Think about what you want out of your card. Are rewards important to you? Do you travel a lot? The bells and whistles that come with each card vary, so be sure you're getting a card that meets your needs.
Before applying, always take into consideration the credit requirements of a particular card. You want to avoid applying for top-tier cards if you don't have a great score. Each time you apply for credit, the lender or creditor will do a credit check, which can temporarily affect your score. Apply for cards you believe you have good odds of getting approved for.
How Do I Get A Higher Credit Limit?
You want a low limit to help build your credit while keeping temptation to a minimum. That's great, but you might want to also consider the benefits of a card with a higher limit at some point.
You might think, "I'm not spending more than my current limit, why would I need it any higher?" But you're missing out on the opportunity to improve an important aspect of your credit score: Your credit utilization ratio.
The biggest factor in determining your credit score is your payment history. However, your utilization ratio also makes up a large chunk of your score, and it can cause your score to vary quite a bit from month to month depending on how much you're spending.
Your credit utilization ratio refers to the amount of money you owe compared to your credit limit. So, if you have a credit limit of $1,000 and a credit card balance of $500, your utilization ratio is 50%. The lower your ratio, the better your score will be. Using more than 30% of your available credit can negatively impact your score.
What does this have to do with having a low credit limit? The lower your limit, the less money you can spend before your utilization ratio starts to hurt your credit score.
Take the example above, with the 50% ratio. If, instead of a $1,000 limit, you had a $10,000 limit, your $500 balance would give you a utilization ratio of just 5%, which will have a much more positive effect on your score.
If you want to have a higher limit, you can reach out to your card issuer to ask for a credit limit increase.
If you're denied for a credit limit increase, you may have to first work on improving your score or increasing your income before you'll be able to get an increase.
Using Your Credit Card Responsibly
When used responsibly, a credit card can be a useful financial tool. When used irresponsibly, a credit card can turn into your worst financial nightmare.
The most important rule of responsible credit card usage is to make your monthly payments on time each month, and in full if you can. Remember that payment history is the most important part of your credit score, and late payments can seriously hurt your credit.
Why pay in full? When you pay the full balance each month, you won't have to pay interest on that money.
If you aren't able to pay in full every month, be aware of the minimum payment. When you only pay the minimum payment each month, you maximize both the amount of money you'll spend in interest and how long it will take for you to pay off your bill in full.
In general, it's always good to keep track of all your credit card accounts and make sure you aren't spending more than what you can afford to pay back and are keeping your credit utilization low.
Finally, keep in mind that while perks are nice, don't spend just for the sake of getting the cash back or rewards points.
Spend responsibly and you'll be on your way to a strong and healthy credit history.
Rocket HQSM has partnered with CardRatings for our coverage of credit card products. Rocket HQ and CardRatings may receive a commission from card issuers. Opinions, reviews, analyses & recommendations are the author’s alone, and have not been reviewed, endorsed or approved by any of these entities.
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