Are you looking to build your credit but don't have a solid credit history yet? Don't worry! Unsecured credit cards can be a great solution to help you kickstart your credit-building journey. In this article, we'll explore what unsecured credit cards are, how they work, and the best options you can look into to start building your credit effectively. Let's dive in!
Unsecured Credit Cards For Building Credit Table of Contents
What are Unsecured Credit Cards?
Unsecured credit cards are a type of credit card that doesn't require any collateral or security deposit when signing up. They're different from secured credit cards, which require a deposit that typically serves as your credit limit. If you fail to make payments on a secured card, the issuer has the right to claim the deposit as repayment. With unsecured credit cards, there's no such deposit at risk, making them a more attractive option for people looking to establish or rebuild their credit.
Pros of Unsecured Credit Cards
- No collateral required – Unlike secured cards, you don't need to put down a deposit to get approved for an unsecured card.
- Credit limit increases – As you demonstrate responsible use, issuers may increase your credit limit, boosting your credit score.
- Rewards and benefits – Unsecured cards often come with rewards programs and other benefits, such as cashback or travel points.
Cons of Unsecured Credit Cards
- Higher interest rates – Unsecured cards often have higher interest rates than secured cards or cards for people with good credit.
- Potential fees – Some unsecured cards come with annual fees and other charges, which can add up over time.
- Harder to qualify – It might be more challenging to get approved for unsecured credit cards if you have a limited or poor credit history.
Best Unsecured Credit Cards for Building Credit
Now that you have a basic understanding of what unsecured credit cards are, let's explore some of the best options available for people looking to build their credit. Keep in mind that approval for these cards may vary depending on your credit history and other factors.
1. Capital One Platinum Credit Card
- No annual fee
- Automatic credit limit increase after responsible use
- Access to CreditWise, a free credit monitoring tool
2. Petal 2 Visa Credit Card
- No annual fee
- Cashback rewards program
- Available to those with no credit history
3. Discover it Secured Credit Card
- Refundable security deposit
- Cashback rewards program
- No annual fee
Unsecured Credit Cards For Building Credit Example:
Jenny is a recent college graduate who has never had a credit card before. She wants to build her credit to be able to qualify for an auto loan and eventually a mortgage. After researching unsecured credit cards, she applies for the Capital One Platinum Credit Card.
In just a few months, Jenny uses the card responsibly, paying off her balance in full each month, and sees her credit score gradually improve. After six months, Capital One increases her credit limit, which further boosts her credit score. Over time, she's able to apply for other credit products with better rewards and lower interest rates.
Building your credit can seem like a daunting task, but unsecured credit cards are an excellent way for beginners to get started. By responsibly using an unsecured credit card, you'll steadily improve your credit score and open up more opportunities for better financial products in the future. So, why wait? Start exploring your options today and begin your journey towards a better credit future. Be sure to share this article with your friends and check out our other Flik Eco guides for more valuable financial tips and advice.
