Are you looking to build your credit but don’t know which credit card to choose? With so many options available, it can be overwhelming to decide which one is best for your needs. In this article, we will review the top credit cards for building credit, focusing on how these cards can help you establish a strong credit history.
What is Building Credit?
Before we dive into the best credit cards for building credit, it’s important to understand what building credit means. Your credit score is a three-digit number that reflects your creditworthiness, or how likely you are to pay back a loan. A good credit score is usually considered to be above 700, while a score below 600 is considered poor.
There are a few different factors that go into your credit score, including your payment history, the amount of debt you have, the length of your credit history, and the types of credit you have. Building credit means taking steps to improve your credit score by demonstrating responsible credit behavior.
Types of Credit Cards for Building Credit
There are two main types of credit cards that are suitable for building credit: secured and unsecured.
Secured credit cards are backed by a security deposit, which is usually equal to the credit limit. This means that if you default on your payments, the issuer can use your security deposit to cover the cost of the debt. Secured credit cards are a good option for people with no credit history or poor credit, as they are easier to get approved for.
Unsecured credit cards, on the other hand, do not require a security deposit. These types of credit cards are more difficult to get approved for if you have poor credit, but they can be a good option if you have a fair or good credit score.
The Best Credit Cards for Building Credit
Now that we have a better understanding of the different types of credit cards for building credit, let’s review some of the best options available.
Capital One Secured Mastercard: This is a secured credit card that requires a security deposit of $49, $99, or $200, depending on your creditworthiness. The credit limit ranges from $200 to $1,000, and the annual fee is $0. The Capital One Secured Mastercard also offers a cash-back rewards program, which is rare for secured credit cards.
Discover it Secured Credit Card: This is another secured credit card that requires a security deposit of at least $200. The credit limit is equal to the security deposit, and the annual fee is $0. The Discover it Secured Credit Card offers 2% cash back on up to $1,000 in combined purchases at gas stations and restaurants each quarter, as well as unlimited 1% cash back on all other purchases.
Capital One Platinum Credit Card: This is an unsecured credit card that is suitable for people with fair credit. The annual fee is $0, and the credit limit ranges from $300 to $1,000. The Capital One Platinum Credit Card offers a cash back rewards program, as well as access to a higher credit limit after making your first five monthly payments on time.
Discover it Credit Card: This is an unsecured credit card that is suitable for people with good credit. The annual fee is $0, and the credit limit varies based on your creditworthiness. The Discover it Credit Card offers a cash back rewards program, as well as a 0% intro APR on purchases for the first 14 months.
List of the top 5 credit cards for building credit
Credit cards can be an excellent tool for building credit, but only if you use them responsibly. Having a good credit score can make a significant difference when it comes to getting approved for loans, renting an apartment, or even landing a job. However, not all credit cards are created equal, and some are better than others for building credit. In this article, we’ll take a closer look at the top credit cards for building credit, including their features, benefits, and drawbacks.
Card 1: Discover it® Secured Credit Card
Features:
The Discover it® Secured Credit Card is a secured credit card that requires a security deposit of $200 to $2,500, which determines your credit limit. The card has no annual fee and offers 2% cash back at gas stations and restaurants on up to $1,000 in combined purchases each quarter. Plus, you earn 1% cash back on all other purchases. Discover also matches all the cashback you earn in your first year.
Benefits:
The Discover it® Secured Credit Card is an excellent option for people with no or limited credit history. The card reports to all three credit bureaus, and responsible use of the card can help establish or improve your credit score. Additionally, Discover has a feature that allows you to see your FICO credit score for free, so you can track your progress.
Drawbacks:
The main drawback of the Discover it® Secured Credit Card is that it requires a security deposit, which may be a barrier for some people. Additionally, the 2% cashback category is limited to gas stations and restaurants, which may not be ideal for everyone.
Card 2: Capital One Platinum Credit Card
Features:
The Capital One Platinum Credit Card is an unsecured credit card that doesn’t require a security deposit. The card has no annual fee and offers access to a higher credit line after you make your first five monthly payments on time. The card also provides fraud coverage if your card is lost or stolen.
Benefits:
The Capital One Platinum Credit Card is a good choice for those with average credit scores. The card reports to all three credit bureaus and offers the opportunity to build credit with responsible use. The higher credit line after five on-time payments is a significant benefit that can help you establish or improve your credit score.
Drawbacks:
One of the main drawbacks of the Capital One Platinum Credit Card is that it doesn’t offer any rewards or cash back. Additionally, there may be other cards with lower interest rates or more benefits, depending on your specific needs.
Card 3: Petal® 2 “Cash Back, No Fees” Visa® Credit Card
Features:
The Petal® 2 “Cash Back, No Fees” Visa® Credit Card is an unsecured credit card that offers up to 1.5% cashback on all purchases. The card has no annual fee, no late fees, and no foreign transaction fees. Additionally, the card offers credit limits between $500 and $10,000.
Benefits:
The Petal® 2 “Cash Back, No Fees” Visa® Credit Card is an excellent option for people with limited or no credit history. The card uses a proprietary algorithm that looks beyond credit scores to evaluate applicants’ creditworthiness. This means that you may be approved even if you have little to no credit history. The cashback rewards, no fees, and flexible credit limits are also attractive features.
Drawbacks:
One of the main drawbacks of the Petal® 2 “Cash Back, No Fees” Visa® Credit Card is that it has limited availability. The card is only available to those with fair or limited credit, and even then, approval is not guaranteed. Additionally, the cashback rewards are not as high as some other cards, so if earning cashback is your primary goal, you may want to consider a different card.
Card 4: Capital One QuicksilverOne Cash Rewards Credit Card
Features:
The Capital One QuicksilverOne Cash Rewards Credit Card is an unsecured credit card that offers 1.5% cash back on all purchases. The card has an annual fee of $39 and provides access to a higher credit line after you make your first five monthly payments on time. The card also offers fraud coverage if your card is lost or stolen.
Benefits:
The Capital One QuicksilverOne Cash Rewards Credit Card is a good option for those with average credit scores who want to earn cashback rewards. The card reports to all three credit bureaus and offers the opportunity to build credit with responsible use. The higher credit line after five on-time payments is also a significant benefit that can help you establish or improve your credit score.
Drawbacks:
The main drawback of the Capital One QuicksilverOne Cash Rewards Credit Card is the $39 annual fee, which may be a deal-breaker for some people. Additionally, the card doesn’t offer any bonus cashback categories like other cards do.
Card 5: Discover it® Student Cash Back
Features:
The Discover it® Student Cash Back is a student credit card that offers 5% cashback in rotating categories each quarter, up to $1,500 in purchases per quarter. The card has no annual fee and offers a $20 statement credit each school year for a 3.0 GPA or higher. Discover also matches all the cashback you earn in your first year.
Benefits:
The Discover it® Student Cash Back is an excellent option for students who want to earn cashback rewards while building credit. The card reports to all three credit bureaus and offers the opportunity to establish or improve your credit score with responsible use. The $20 statement credit for good grades is also a unique benefit that can help students save money.
Drawbacks:
One of the main drawbacks of the Discover it® Student Cash Back is that the 5% cashback categories rotate each quarter and may not always align with your spending habits. Additionally, the $1,500 quarterly limit on the bonus category may be a limiting factor for some students.
Conclusion:
Building credit takes time and responsible use of credit products. Choosing the right credit card can be an important step in establishing or improving your credit score. The Discover it® Secured Credit Card, Capital One Platinum Credit Card, Petal® 2 “Cash Back, No Fees” Visa® Credit Card, Capital One QuicksilverOne Cash Rewards Credit Card, and Discover it® Student Cash Back are all excellent options for building credit. When choosing a credit card, consider your credit history, spending habits, and specific needs to find the card that works best for you. Whatever card you choose, be sure to use it responsibly and pay your bills on time to establish a positive credit history.
Table of Contents
How to Use Credit Cards to Build Credit
When it comes to building credit, credit cards can be a powerful tool. If used responsibly, credit cards can help you establish a positive credit history and improve your credit score over time. In this article, we’ll discuss some tips for responsible credit card usage and strategies for using credit cards to build credit.
The Best Credit Card in the USA: Our Top Picks for Rewards, Fees, and More
Tips for Responsible Credit Card Usage
Before we get into the strategies for using credit cards to build credit, let’s first go over some tips for responsible credit card usage:
1. Make On-Time Payments
One of the most important things you can do when using a credit card to build credit is to make on-time payments. Your payment history makes up 35% of your credit score, so it’s crucial to pay your bill on time every month.
2. Keep Your Balance Low
Another key factor in building credit is keeping your credit utilization ratio low. This ratio compares the amount of credit you’re using to your total credit limit. Keeping your balance low (ideally below 30% of your credit limit) can help you establish a positive credit history and improve your credit score over time.
3. Avoid Fees
Credit card fees can quickly add up and put a dent in your efforts to build credit. To avoid fees, make sure you understand your card’s terms and conditions, and always pay your bill on time.
4. Monitor Your Credit Score
Finally, it’s important to monitor your credit score regularly to track your progress and ensure that there are no errors on your credit report. You can get a free copy of your credit report once a year from each of the three major credit bureaus (Equifax, Experian, and TransUnion) at annualcreditreport.com.
Strategies for Using Credit Cards to Build Credit
Now that we’ve covered some tips for responsible credit card usage, let’s discuss some strategies for using credit cards to build credit:
1. Apply for a Secured Credit Card
If you’re new to credit or have a limited credit history, a secured credit card can be a great way to build credit. With a secured credit card, you’ll be required to put down a deposit that acts as collateral for your credit line. This reduces the risk to the credit card issuer and can make it easier for you to get approved.
2. Become an Authorized User
Another way to build credit with a credit card is to become an authorized user on someone else’s account. This can be a friend, family member, or spouse. As an authorized user, you’ll be able to use the credit card and build credit based on the primary cardholder’s payment history.
3. Use Your Credit Card for Small Purchases
Using your credit card for small purchases and paying the balance in full each month can help you establish a positive credit history. Just make sure you don’t overspend and can afford to pay off the balance in full.
4. Don’t Close Old Accounts
Closing an old credit card account can hurt your credit score by reducing your available credit and shortening your credit history. Even if you’re not using an old credit card, it’s usually best to keep the account open and use it occasionally to keep it active.
5. Consider a Credit Builder Loan
A credit builder loan is a type of loan designed to help people establish or improve their credit score. With a credit builder loan, the money you borrow is deposited into a savings account, which you make payments on over time. Once the loan is paid off, you’ll have access to the savings account and have established a positive payment history.
6. Upgrade to a Better Card
As you build your credit history, you may qualify for better credit card offers with higher credit limits and lower interest rates. Consider upgrading to a better card to continue building your credit and take advantage of better rewards and perks.
7. Avoid Opening Too Many Credit Cards at Once
While having multiple credit cards can help you build credit, opening too many cards at once can actually hurt your credit score. This is because it can make you appear more risky to lenders and increase your overall credit utilization ratio. Only apply for credit cards that you need and can manage responsibly.
8. Be Patient
Building credit takes time, and there are no shortcuts. Be patient and continue to use your credit card responsibly over time to establish a positive credit history and improve your credit score.
Conclusion
Using credit cards to build credit can be a smart financial move if done responsibly. By following these tips and strategies, you can establish a positive credit history, improve your credit score, and take advantage of the benefits of good credit. Remember to always use credit cards responsibly, pay your bills on time, and monitor your credit report regularly to track your progress.
Tips for Building Credit with Credit Cards
If you’re using a credit card to build your credit, there are a few things you can do to ensure that you are building your credit in the most effective way possible:
Make sure you pay your bills on time: This is one of the most important factors in your credit score, as it reflects your ability to manage your debts. Paying your bills on time every month will help you establish a positive payment history, which will in turn improve your credit score.
Keep your credit utilization low: Credit utilization refers to the amount of credit you are using compared to your credit limit. It’s generally recommended to keep your credit utilization below 30%, as higher utilization can hurt your credit score. For example, if you have a credit limit of $1,000, you should aim to keep your balances below $300.
Don’t apply for too many credit cards: Each time you apply for a credit card, the issuer will do a hard inquiry on your credit report, which can temporarily lower your credit score. To minimize the impact on your credit score, try to limit the number of credit card applications you make.
Consider a credit-builder loan: If you have a hard time getting approved for a credit card, you may want to consider a credit-builder loan. These types of loans are designed specifically for people who are looking to build their credit. The lender will hold onto the loan amount until you have paid it back in full, at which point you will receive the money. This can be a good way to demonstrate responsible credit behavior and improve your credit score.
How to Choose the Best Credit Card for Building Credit
When it comes to choosing the best credit card for building credit, there are a few key factors to consider:
Credit requirements: Make sure to choose a credit card that is suitable for your current credit level. If you have no credit or poor credit, a secured credit card may be the best option for you. If you have fair or good credit, an unsecured credit card may be a better fit.
Fees: Credit cards can come with a variety of fees, including annual fees, late payment fees, and balance transfer fees. Be sure to compare the fees of different credit cards to find one that is affordable for you.
Rewards: If you’re going to be using your credit card regularly, you may want to consider a card that offers rewards. Many credit cards offer cash back, points, or miles for every dollar you spend. Just be sure to read the fine print and understand any restrictions or limits on the rewards program.
Interest rates: Credit card interest rates can vary significantly, so it’s important to compare the annual percentage rate (APR) of different cards. A lower APR means you will pay less in interest charges over time.
Customer service: If you have any issues or questions about your credit card, you’ll want to make sure you have access to good customer service. Look for a credit card issuer that has a reputation for helpful and responsive customer service.
By considering these factors, you can find the best credit card for building credit and take control of your financial future.
FAQs
1. What is a secured credit card?
A secured credit card is a type of credit card that requires a security deposit as collateral. The deposit is usually equal to the credit limit, and it helps reduce the risk for the lender. Secured credit cards are often recommended for people with limited or no credit history, as they can help establish a positive credit history when used responsibly.
2. What credit score is needed to get a credit card for building credit?
There is no specific credit score required to get a credit card for building credit. However, credit cards designed for building credit are typically designed for people with limited or no credit history, and may have lower credit limits and higher interest rates. Some credit card companies may also require a minimum credit score to be approved for a credit card.
3. How long does it take to build credit with a credit card?
Building credit with a credit card takes time and requires consistent, responsible use. It typically takes at least six months of on-time payments and responsible credit usage to establish a credit history and start building a credit score. However, the amount of time it takes to build credit can vary depending on factors such as credit utilization, payment history, and the number of credit accounts you have.
4. Can I build credit without a credit card?
Yes, there are other ways to build credit besides using a credit card. You can establish credit history by taking out a personal loan, a car loan, or a mortgage and making payments on time. Another option is to become an authorized user on someone else’s credit card account, which can help establish a credit history if the primary cardholder has a good credit history and uses the card responsibly.
5. How much should I spend on my credit card to build credit?
There is no set amount you should spend on your credit card to build credit. However, it’s important to use your credit card responsibly and avoid overspending. A good rule of thumb is to keep your credit utilization ratio below 30% of your available credit limit. For example, if you have a $1,000 credit limit, you should try to keep your balance below $300. Paying your balance in full each month can also help establish a positive payment history and improve your credit score.
Conclusion
Building credit is an essential part of financial wellness, and credit cards can be a useful tool for establishing a positive credit history. By using credit cards responsibly, paying on time, and keeping your balances low, you can build a strong credit profile over time.
It’s important to choose the right credit card for your needs and financial situation. If you’re new to credit or have a limited credit history, a secured credit card or a credit card designed for building credit can be a good option. Look for cards with low fees and interest rates, and be sure to read the fine print before applying.
When using a credit card to build credit, it’s crucial to use it responsibly and avoid overspending. Keeping your balances low and paying your bills on time can help you establish a positive credit history and improve your credit score over time.
In conclusion, building credit takes time and effort, but it’s an essential part of achieving financial stability. By choosing the right credit card and using it responsibly, you can build a strong credit history and enjoy the benefits of good credit for years to come.
