The Best Credit Card for Building Credit
If you’re reading this, you already know that having good credit is important. Credit affects a lot of key areas in our lives — where we live, what kind of car we drive, even our ability to get a job.
Credit cards are a great way to build up your credit score. There’s just one problem…often, you need good credit to even get a card in the first place. How can you build credit without credit?
Luckily, there are good starter credit cards that can help people improve their credit score. Once you know what to look for, you can find the one that’s right for you.
So what’s the best credit card for building credit? Read on to find out.
How To Find The Best Credit Card For Building Credit
There are a few different options available to you. The best one will depend on your financial situation. Whether you have a bad credit score or no credit at all, there’s likely a category that will help you improve your credit health.
Secured credit cards are great for people who have no credit and people who have poor credit. (Your credit is considered ‘poor’ if your FICO score is below 579.) Because they’re designed for people who have bad credit, they’re great tools for building up your credit score.
However, be aware that they do come with more limitations than an unsecured card.
You’d use a secured card the same way you’d use a traditional card. However, you have to put down a cash deposit first, there are high annual fees, and you’ll probably have a low credit limit. If you stop paying, the company will use your deposit.
Think of them as credit cards for beginners. Once you’ve demonstrated responsibility with a secured card, you can move up to an unsecured card.
Unsecured cards are traditional credit cards. These don’t require a cash deposit to be set up. While your credit limit will vary depending on your history, you don’t have to pay any money to start using your card.
If you can manage it, an unsecured credit card is the best credit card for building credit. Aside from the secured vs. unsecured debate, though, there are a few other things to be on the lookout for as you make your choice.
If you’re currently pursuing a degree, you might be eligible for a student card. Credit card companies know that college students need credit, but don’t necessarily have a lot of it yet. They’ve designed cards just for this purpose.
If you can demonstrate that you have some sort of income and can pay your minimum monthly payment, you’re good to go. Depending on the card you choose, you might even get rewarded for keeping your GPA high.
As long as you make your payments on time and don’t go overboard with spending, student credit cards are also good starter credit cards.
This isn’t a specific type of credit card, but it is a feature that you should look for. Certain secured, unsecured, and student cards offer cash back on certain purchases. When you use it right, you can make money by spending money.
As you’re choosing the card that’s right for you, you should always look to see if they have a cash back option. Your money can work for you as you’re building credit — that’s a win you don’t want to pass up.
Best Credit Cards To Build Credit
Now that we’ve covered the different types of credit cards you might come across as you search, let’s go over some of the best credit cards to build credit. We’ll go into the pros and cons of each card, as well as let you know what the biggest benefits of each one are.
Discover It Secured
This card from Discover stands out for one big reason — it’s one of the few secured cards that will actually offer you rewards.
With the Discover It card, you can earn 2% cash back for spending on gas and at restaurants, and 1% on everything else. You can also get a free monthly FICO score so that you can check how your score is improving.
You’ll be forgiven if you make one late payment, but after that, there will be a $37 late fee.
Since it’s a secured card, there is a $200 minimum deposit to open an account. The APR is also high — 24.49%. But there’s no annual fee, and they’ll automatically review your account after eight months to see if you can transition to a secured card.
Capital One Secured Mastercard
If you prefer a card that’s accepted pretty much everywhere, the Capital One Secured Mastercard might be your best credit card for building credit. It doesn’t offer cash back like Discover does, but that’s really the biggest downside.
You can make a smaller initial deposit with this card, as low as $49 depending on your credit history. This is great for people who don’t have a lot of cash on hand to pay the initial deposit for a secured card.
Your initial credit line will be low, but you can increase it as long as you make your first five monthly payments on time.
If you need to go the secured route, this is a good option.
Capital One Platinum Credit Card
What if you don’t know your credit score? Too many inquiries about your credit can actually lower your score, so checking your credit can sometimes be a risky move.
If you don’t know what your score is, Capital One will let you do a soft inquiry, AKA a check that won’t hurt your score. If you qualify, this is one of the really good starter credit cards.
There is no annual fee and Capital One offers additional benefits, like online banking and travel accident insurance. Similar to their Secured Mastercard above, you can increase your credit limit if you make your first five monthly payments on time.
Be sure you do pay on time — the biggest downside is that APR, which can get as high as 28.99%.
Credit One Bank Platinum Visa
If you want cash back for your spending and an unsecured card, you might want to consider this option from Credit One. Not only is there a potential for a higher credit line than some of the other cards on this list ($300 vs. $200), you can earn 1% cash back on your purchases.
You’ll want to double check the contract before you sign on the dotted line, though, because your offer might only qualify you for cash back on certain purchases. The other major downside? This card comes with an annual fee that can be anywhere from $0 to $99.
Both the annual fee and the cash back deals are dependent on your credit. If you have okay credit, this might work well for you.
Indigo Platinum Mastercard
Let’s say you don’t just have poor credit, but you also have a bankruptcy in your past. That can make things even more difficult when you’re trying to apply for a credit card.
The Indigo Platinum Mastercard doesn’t automatically blackball people for having spotty credit histories. If you’re really worried about your past credit, this is a good bet. They’ll even let you pre-qualify with a soft credit check.
This card does have an annual fee. How much you pay will depend on your credit, so you could end up shelling out anywhere between $75 to $99 per year to maintain your card.
Discover It Student
For those who are currently enrolled in college, Discover has a fantastic credit card option for students. This is definitely one of the best starter credit cards for people who are also starting out in life.
There’s no annual fee and no foreign transaction fee, so you can take this card with you if you’re studying abroad. To help you get started, Discover also waives the APR on purchases for your first six months. Don’t let that start any bad habits, though — after the six months are over, your APR will shoot up.
Depending on your credit score, though, you’d likely get a lower APR than some of the other cards on this list. You can also earn 5% cash back when you spend money at places like gas stations or grocery stores.
Journey Student Rewards
The last credit card on our list is an option from Capital One. Similar to the Discover card above, you have to be currently enrolled as a college student to apply for the card.
There are no fees to use the card each year, and you can increase your credit line with five months of on-time payments. If you want to check how you’re doing, they offer a free app to help you track your credit profile.
You can also get cash back with the Journey card, but the rewards are smaller at just 1%.
How We Can Help You
Now that you know the best credit card for building credit, discover the other ways Bonsai Finance can help you improve your financial life. We’re dedicated to giving you the best advice possible.