5 Things to Know About the Cerulean Credit Card

At first glance, the Cerulean credit card — issued by The Bank of Missouri and serviced by Continental Finance — may seem appealing, particularly if your credit is less than perfect. It doesn’t require a security deposit, and it and offers a potentially generous credit limit, if you can qualify. Plus, it's a Mastercard, so it'll be widely accepted, and your payments are also reported to all three major credit bureaus, a must-have in a credit-building journey.

All of the features look solid until you get to the hefty annual fee and whopping interest rate. Compared with some other unsecured credit cards for bad credit (FICO scores of 629 or lower), it does have fewer fees overall. But there are still less expensive options that can help you build credit. Plus, the card is currently available only through certain partner channels.

Here’s what you need to know about this card and the less costly alternatives for your credit-building goals.

» MORE: See NerdWallet’s best credit cards with no credit check

1. It's expensive to carry

While the Cerulean credit card doesn’t tack on monthly "maintenance fees" like some other cards in its class, its annual fee alone should be enough to make you rethink things.

Cardholders can expect the following fees:

• Annual fee: $125.

• Late payment fee: Up to $41.

• Additional card fee: $30.

• Potential fee for credit limit increase: The card's terms and conditions note that "if you qualify for and accept to receive a credit limit increase, we may impose a fee."

If you can afford to pay the $125 annual fee to hold the Cerulean credit card, you’re likely better off saving for the security deposit on a secured credit card. You'll get that deposit back with a good payment history after closing the account. But with the Cerulean credit card, the $125 you pay each year is gone for good.

For fewer fees, instead consider: The Capital One Quicksilver Secured Cash Rewards Credit Card requires a minimum $200 security deposit, but you can get it back with a good payment history after closing the card or upgrading to an unsecured card with the same issuer. It earns 1.5% cash back on most purchases, making it easy to get back some monetary value while your security deposit is tied up. After six months of holding the card, you are also considered for an automatic credit limit increase.

» MORE: See NerdWallet's best secured credit cards

2. There’s a potentially generous credit limit

The credit limit ranges for the Cerulean credit card will vary, depending on eligibility — but if you have poor credit, you should expect to qualify for a lower credit limit. As of this writing, a chief marketing officer for the company confirmed that you can qualify for a credit limit of $750 or $1,000, if you’re eligible. And the card's annual fee will compound that problem.

For example, you may initially qualify for a $750 credit limit, but when you factor in the $125 annual fee, you're really starting out with a $625 credit limit until you pay that fee. That affects your buying power, but it also has implications for your credit utilization ratio, which is the percentage of available credit you're using (a major factor in your credit scores). Experts recommend using no more than 30% of your available credit limit, but in the scenario above, you're already at about 42% — before you've even swiped your card.

And as noted above, while it's possible to receive a credit limit increase, you'll have to wait for at least 13 months, and you may also be charged for that increase.

For a credit limit increase, instead consider: You can get a similar credit limit opportunity with a low-cost card like the Capital One Platinum Secured Credit Card. Depending on your eligibility, you might qualify for a $200 credit limit for a security deposit as low as $49. If you make the monthly payments on time, it may be possible to access a higher credit limit in as little as six months without having to deposit more money.

» MORE: See NerdWallet’s best starter credit cards

3. The APR is extremely high

It’s not uncommon to see high interest rates on credit cards for those with less-than-perfect credit, but it can be a recipe for debt when you're also paying an annual fee. As of this writing, the card's APR on purchases and cash advances was nearly 36%, making it an expensive option if you plan to carry a balance or get cash. (For cash advances, you'll also pay a fee of $10 or 3%, whichever is greater.)

For no interest, instead consider: A card like the Chime Secured Credit Builder Visa® Credit Card allows you to build credit safely without the risk of debt. You can’t carry a balance on the card, so it charges neither fees nor interest. (Out-of-network ATM withdrawal fees apply except at MoneyPass ATMs in a 7-Eleven location or any Allpoint or Visa Plus Alliance ATM.)

You must have a Chime® checking account to fund the card's flexible security deposit, but it might be worth opening that account if you sometimes need to supplement your cash flow. Chime's checking account has a program called SpotMe, an overdraft service that allows customers to overdraft up to $200 with no fee if they can meet account requirements.

» MORE: See NerdWallet’s best alternative credit cards

4. There’s no apparent upgrade path

The Cerulean credit card doesn’t appear to offer a way to upgrade to an unsecured credit card or lower the cost of the annual fee. When you’re establishing credit, it's preferable to have an option you can switch to as you climb up the good-credit ladder.

For a path to upgrade to an unsecured card, instead consider: With the Discover it® Secured Credit Card, the issuer begins conducting automatic monthly reviews after seven months to see whether you qualify to move to an unsecured option. The card requires a $200 security deposit, but you can get it back with a good payment history after closing the card or upgrading to the issuer's unsecured option. The card's sign-up bonus and ongoing cash-back rewards — 2% at gas stations and restaurants on up to $1,000 in combined purchases each quarter and 1% on everything else — can also put some money back in your pocket while the deposit is tied up.

5. The Continental Credit Protection program is optional

The Cerulean credit card offers an optional Continental Credit Protection program, a form of insurance that covers the minimum payment owed if you become unemployed, disabled or hospitalized. In the event of loss of life, the program covers the outstanding account balance. Terms apply. To qualify for the coverage, you pay a monthly fee of $1.39 cents for every $100 of the outstanding balance. If you have a balance of $1,000, that’s a monthly cost of around $13.90 until the balance decreases. To use the program, you’ll have to file a claim by phone, mail or email to activate the benefits.

While having this option may offer peace of mind, it likely isn't worth the cost. Generally, after death, your estate is responsible for covering unpaid debts. If there is no money or property left to do so, the debt is generally left unpaid. For hospitalization, the program covers only your minimum payment for one month. Even if you had charged over $1,000 to the card, the coverage for a minimum payment wouldn't be much in this instance. For disability and job loss, the program covers the minimum payment for up to 12 months for each option. But if you can qualify for unemployment or disability insurance, you might not need to rely on this option.