Indigo Mastercard Review: Designed for Poor Credit, but Loaded With Hidden Fees

The Indigo® Mastercard® is an unsecured credit card designed to help you improve your credit. Unlike secured credit cards, this card doesn't require an upfront deposit before you use it. But be warned: the card may still charge an enormous annual fee, which, unlike a security deposit, is nonrefundable. It might help you build credit, but truthfully -- there are better credit cards for bad credit out there. To help you decide if it's right for you, we'll take a closer look at the Indigo® Mastercard® in this in-depth review.

Top perks

In addition to having a really cool credit card design, the Indigo® Mastercard® comes with a few perks worth noting.

No security deposit necessary

Since this is an unsecured credit card, you don't need to put up a security deposit to use it. This could help you if you want to improve your credit, but don't have the $200 to $5,000 deposit that many secured credit cards will require.

Get a prequalification

You can prequalify for the Indigo® Mastercard® to see if you'll get approved. Better yet, it doesn't affect your credit score and is for your information only.

Reports to major credit bureaus

When you use the Indigo® Mastercard®, your monthly payments will be reported to the three major credit bureaus: Equifax, Experian, and TransUnion. This ensures that your good crediting activities are monitored by the companies making credit reports and will overtime be reflected in your credit score.

What could be improved

Don't be fooled by the card's simple design and pretty colors. For all its talk of helping you build credit, the Indigo® Mastercard® isn't transparent about fees and could end up costing you over the long run. Before you apply, let's try to clear up some of this card's disorder.

Confusing fee structure

Though it doesn't state the annual fee upfront on the card's webpage, you'll find out after you apply how much you might have to pay.

The fee is based on your credit history, with stronger credit scores likely getting lower or even $0 fees. A common fee structure is that you'll pay $75 for the first year, then $99 for each year after. By contrast, many of the best secured credit cards charge no annual fees and will return your security deposit when you close or upgrade the card, as long as you make payments on time.

To make things even more confusing, if your card does have a fee, your line of credit will be temporarily reduced by the same amount until you pay it. For example, if your card has a $75 fee, your $300 credit line would initially be $225.

Rewards program isn't for all

Some Indigo® Mastercard® cardholders may earn an unlimited 1.5% cash back on purchases. That's not a bad earn rate, but again -- these rewards are likely reserved for those with better credit scores. In contrast, many secured credit cards we've reviewed have more transparent rewards programs and could earn an unlimited 1.5% to 3% back on your everyday purchases.

Foreign transaction fee

The will charge you a fee of 1% of each transaction in U.S. dollars for any foreign transactions charged to the card. While some credit cards have foreign transaction fees as high as 3%, many others don't charge the fee at all.

The Indigo® Mastercard® is designed for people who are building or repairing their credit scores, which generally means their FICO® Score falls below 579. That said, a variety of factors will be considered, such as your income and debt, so it's possible you could get denied with a low score -- or even denied with a high one, too.

• You want to improve or repair your credit score.
• You've never had a credit card before and you want to build your credit.
• You don't want to put down a security deposit on a credit card and prefer an unsecured card instead.
• You want your credit card company to report to major credit bureaus.

Our credit card methodology

At The Motley Fool Ascent, we rate credit cards on a five-star scale (1 = poor, 5 = best). Our rating criteria includes rewards rates, welcome bonuses, fees, and perks like travel credits and 0% intro APR offers to evaluate our ratings.

We combine these factors with an evaluation of brand reputation and customer satisfaction to ensure you're getting the best card recommendations. Learn more about how The Ascent rates credit cards.