Are you looking to build your credit but don't know where to start? Credit cards can be a great tool to help you build your credit history and improve your overall financial profile. However, not all credit cards are created equal – so it's crucial to choose the right one for your financial goals. In this article, we'll discuss the best credit cards for building credit, and how to choose the right card for your needs. So grab a seat and let's dive in!
Credit Cards For Building Credit Table of Contents
Why Choose a Credit Card to Build Credit?
Using a credit card responsibly can help you establish a positive credit history, which will make it easier for you to secure loans, rent an apartment, or even get a job in the future. Credit cards are an accessible way for millennials to build credit because they often have lower credit score requirements and more flexible terms. Here's what you need to know to pick the right card for you:
Secured vs. Unsecured Cards
There are two main types of credit cards to consider when building credit:
- Secured Cards: These cards require a cash deposit upfront, which serves as collateral and determines your credit limit. They're an excellent option for beginners with no credit or a low credit score.
- Unsecured Cards: These cards don't require a deposit and have higher credit limits. However, they often have stricter credit score requirements and may include annual fees or higher APRs.
Annual Fees and APRs
When choosing a credit card, consider the following costs:
- Annual Fees: Some cards charge a yearly fee, so be sure to weigh this cost against the card's benefits.
- Annual Percentage Rate (APR): This is the interest you'll pay on any balances you carry from month to month. Look for low APRs to minimize interest expenses.
Rewards and Perks
Many credit cards offer rewards and perks, such as:
- Cashback on purchases
- Travel or hotel rewards
- Zero fraud liability
- Free credit score monitoring
Keep these benefits in mind when comparing cards but always prioritize responsible credit-building habits.
Best Credit Cards for Building Credit
Here are some of the top credit cards to consider for building your credit:
1. Capital One Platinum Credit Card
A popular card among millennials, this unsecured credit card offers no annual fee, free credit monitoring, and access to a higher credit line after making your first five monthly payments on time.
2. Discover it Secured Card
This secured card offers 1-2% cash back on purchases, reports to all three credit bureaus, and matches your cashback rewards at the end of your first year. Plus, it has no annual fee.
3. Petal 2 "Cash Back, No Fees" Visa Credit Card
This unsecured card is great for those with no credit history and offers 1-1.5% cash back on purchases, along with no annual fees or international transaction fees.
Credit Cards For Building Credit Example:
Meet Sarah, a recent college graduate who's looking to establish her credit. She has a part-time job and her credit score is on the lower side. After researching her options, Sarah decides to apply for the Discover it Secured Card.
She makes a $300 deposit, which serves as her credit limit, and begins using the card for small purchases. She pays her balance in full each month to avoid interest charges. In addition to cashback rewards, Sarah's card offers free access to her FICO credit score, so she monitors her progress regularly.
Within six months, Sarah's credit score shows significant improvement, and she's on the path to financial success.
By choosing the right credit card and using it responsibly, you can make significant strides in building your credit and opening up financial opportunities for the future. Remember to select a card that fits your needs, keeps costs low, and reports to all three credit bureaus.
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