Your willingness to pay an annual fee, your work situation, and your credit history are just a few of the elements that will determine which is the best first credit card for you. The goal for everyone applying for their first credit card should be to discover the card that best suits their needs and financial situation, regardless of their age, gender, race, or income level. You should have a credit card that encourages and rewards responsible use from the get-go. This article explains how to use secured cards to build credit with no credit. We also added a list of the best credit cards to build credit for students. Let’s dive in!
Secured Credit Cards to Build Credit
If you don’t have any credit history or have bad credit, using a credit card can be a wise move to start or restore your credit as long as you manage your money responsibly. Although there are literally hundreds of credit cards to choose from, the vast majority of them require applicants to have at least some credit history. It can be challenging for those with less-than-perfect credit (usually a score below 580) or no credit history to get approved for a credit card.
If you have a difficult time being approved for traditional forms of credit, a secured credit card may be your best option. Credit is extended, interest is charged, and rewards may be offered, just like a regular credit card, but a deposit is usually required (about $200) before you can use the card. The amount of your initial deposit serves as your credit limit; increasing your initial deposit will do the same. In the event that you are unable to make rent payments, the security deposit will be used as collateral. However, you won’t lose your deposit if you pay off your account in full and cancel the service.
For those with little to no credit history or a low credit score who are unwilling or unable to make a security deposit, there are other credit card options available. A credit card can help you establish a positive credit history if you utilize it wisely. It’s important to use a credit card responsibly after getting one, which includes not going over your limit and paying the bill in whole and on time each month.
The following are some secured credit cards to build credit:
#1. Discover it® Secured Credit Card
Many of the perks and benefits that are often reserved for those with better credit are made available to those with the Discover it® Secured Credit Card, such as a generous cash-back program, no annual fee, and no fees for making international purchases. To open a Discover it® Secured Credit Card, you must make a deposit of at least $200 and no more than $2,500. The amount you deposit serves as your credit limit.
Cardholders get 2% cash back at gas stations and restaurants up to $1,000 every quarter (then 1%). Furthermore, all additional purchases will give you an infinite 1% cash back. For new customers, Discover will double their cash-back rewards for the first 12 months of card membership. At the end of the first year, Discover will match your cash-back total up to $100.
This card stands out since cardholders can easily transfer to unsecured cards. When your credit card account has been open for seven months, Discover will check to determine if you qualify for an unsecured line of credit and the refund of your deposit. This eliminates the suspense of trying to predict when you will be eligible to switch to an unsecured card.
#2. Capital One Platinum Secured Credit Card
If you need a secured card but can’t pay the standard $200 deposit, the Capital One Platinum Secured Credit Card may be one of the secured credit cards to build credit for you. There is no annual fee, and the security deposit ranges from $49 to $99 to $200 (depending on credit).
If you meet the requirements, you can get a $200 credit line with just a $49 or $99 down payment. Capital One requires a less down payment and evaluates consumers for an enhanced credit limit after six months. This is a wonderful reason to manage your cards responsibly.
You won’t get any perks or a bonus like you would with the Discover it® Secured Credit Card. Similarly, Capital One does not provide a definitive timeline for when secured cardholders can apply for an unsecured account.
#3. Deserve Digital First Card™
For those who lack the funds for a traditional security deposit, the Deserve Digital First CardTM is one of the secured credit cards to build credit you can go for. Foreign transactions and annual fees are both free. The card is immediately available after approval, and it can be used with Apple Pay. You can earn cash rewards of up to 1.5% of your monthly purchases by using your credit card regularly.
#4. U.S. Bank Cash+® Visa® Secured Card
The U.S. Bank Cash+® Visa® Secured Card is a good option if you are looking to establish or improve your credit while receiving cash rewards. Your card purchases will earn you:
- 5% rebate on the first $2,000 spent quarterly across any two categories you select. Television, the internet, streaming services, utilities, mobile phone companies, quick service restaurants, and movie theaters are just a few examples.
- Get 2% cash back on purchases at the category of your choice (convenience stores, grocery stores, restaurants, etc.)
- For any other purchases, you’ll get 1% back.
You can get a statement credit, a direct deposit to your U.S. Bank checking, savings, or money market account, or a U.S. Bank rewards card (which works like a Visa gift card) with the cashback you earn. Also, new cardholders are required to make an initial deposit ranging from $300 to $5,000.
#5. OpenSky Secured Visa Credit Card
When compared to many of the secured credit cards to build credit, which often has a maximum credit limit of $2,000 to $2,500, this card’s maximum credit limit (depending on your deposit) of $3,000 is significantly higher. Building credit quickly requires a low credit use rate, which is easier with a high potential limit. This card is convenient for independent individuals who are comfortable with establishing their own credit limit and providing a security deposit, as they do not require a checking account to apply.
#6. Secured Chime Credit Builder Visa Credit Card
There is no credit check or standard security deposit needed to open a Secured Chime Credit Builder card, making it ideal for those with little to no credit history or a low score to begin establishing credit. Instead, the money from the credit card account is transferred to the checking account. People who have little to no credit history would prefer not to put up a large sum of money as a security deposit.
How to Use Credit Cards to Build Credit
Credit cards used responsibly can help you establish a positive credit history and raise your credit score. If used properly, using a credit card can help you build creditworthiness, which opens up a variety of future, more cheap borrowing alternatives. Credit cards are a convenient method to pay for products you need. Here is how to use secured credit cards to build credit:
#1. Always Make Payments on Time
Building good credit with a credit card is easiest when payments are made on time each month. Your payment history accounts for the largest portion of your credit score (35%), with 90% of top lenders using the FICO® Score to make lending decisions. Paying your bills on time shows lenders that you can be trusted, which goes a long way toward helping your credit score rise. However, negative information, such as late payments, remains on credit reports for seven years.
If you want to start establishing credit using a credit card, you should make at least the minimum payment on time every month.
#2. Keep Your Credit Utilization Ratio as Low as Possible
It’s recommended that you keep your credit usage ratio at 30% or lower. Credit card companies may view a balance that is near the limit as an indicator that you may not be able to repay the money you’ve borrowed.
The percentage by which you are actually using your available credit is known as your utilization ratio. Having a balance of $150 on a credit card with a $500 limit means you are using 30% of your available credit. Utilization is computed for every individual card as well as for all of your credit cards together.
#3. Use a Budget With Your Credit Card
Obtaining your first credit card is a huge step in improving your credit, as it allows you to begin making responsible financial decisions that will eventually result in a higher credit score. However, there is also a substantial amount of accountability involved. You may be tempted to make unnecessary purchases because having access to a line of credit is like having free money. But this is a potential doorway to debt. therefore, make a budget before spending to avoid overspending.
#4. Use Your Card Regularly
This is one of the best ways to use secured credit cards to build credit. Your new credit card account should be used on a regular basis; nevertheless, you shouldn’t charge more than you can afford to pay off each month. Credit card companies would rather see active users on your account than inactive ones. Your FICO Score also considers how long it’s been since you used various accounts for the “length of credit history” element.
You do not have to spend a lot on your credit card to establish credit. Using a credit card for a small, regular transaction, like a monthly streaming subscription, and setting up autopay to ensure you never miss a payment, is one approach to establishing credit while keeping your amount manageable. If you use the card regularly and pay on time each month, your credit score should improve even if you don’t use it.
#5. Don’t Open Too Many Accounts at Once
If you want to keep your credit account age average as high as possible and avoid looking like a high risk to lenders, you should avoid opening many credit cards in a short period of time. When you apply for new credit, a hard inquiry will be recorded in your credit history. This can have a minor negative impact on your credit ratings. Therefore, once you obtain a credit card, it is recommended that you keep using it for some time. When applying for a new credit card, give some thought to which card would best suit your needs and try to give each application at least six months between them.
#6. Check Your Credit Regularly
Monitoring your credit report and score is an important part of maintaining excellent credit and making sure your positive credit habits are having the desired effect. There are free resources available to check your credit score and get a sense of where you stand. By registering for free credit monitoring from Experian, you may also automate the practice. When there is an update to your report, you will be notified immediately.
You can use that to track your development. In addition, suspicious or unfamiliar behavior on your credit report should be disputed immediately to help protect yourself from identity theft. This is one of the best ways to use secured credit cards to build credit.
Credit Cards to Build Credit with No Credit
Thinking of how to use credit cards to build credit with no credit? Why not check this out?
Authorized usage of a family member’s or friends credit card might help you establish credit quickly and easily. An authorized user has the legal right to use the primary account holder’s credit for their own benefit. This is a risk-free method of establishing credit, as authorized users are not held responsible for any activity. Furthermore, as an approved user, you may be eligible for additional benefits, such as admission to a VIP airport lounge.
However, before you add a family member or close friend as an authorized user, make sure they have a solid credit history and a history of responsible credit card use.
#2. Apply for a Secured Credit Card
If you are just starting out in the credit world, a secured credit card might be an excellent tool. If you have bad credit or no credit history at all, applying for one of these cards may be easier. Further, with responsible use, a secured card can help you build credit in the same way that an unsecured credit card would.
To all intents and purposes, a secured credit card is the same as an unsecured one, complete with a credit limit, interest payments, and sometimes even rewards. This is surely one of the best ways to use credit cards to build credit with no credit.
#3. Get Credit for Paying Monthly Utility and Cell Phone Bills on Time
There are other options available if you wish to begin establishing credit but don’t yet have a credit card. Many banks and credit unions provide access to credit-building resources, albeit some of them may require a subscription fee. Experian, however, offers a free and straightforward application called Experian BoostTM.
With this program, you may build or repair your credit history simply by paying your monthly utility, cell phone, and streaming service bills on time.
Best Credit Cards to Build Credit for Students
You’ll need a solid credit history to do things like rent an apartment or get approved for a car loan in the real world when you graduate college. One of the best ways to start establishing credit while taking advantage of rewards and subsidized financing options is to apply for a credit card specifically designed for college students. Here is a list of credit cards to build credit for students:
#1. Discover it® Student Cash Back
Students attending either a two- or four-year school can benefit from the opportunity to establish or improve their credit history and get rewards with the Discover it® Student Cash Back card. To apply, you need to be at least 18 years old and a U.S. citizen.
Each quarter, cardholders have the option of enrolling in a new program that offers 5% cash back on rotating categories (such as Amazon.com, gas stations, and restaurants) for purchases up to $1,500 (then 1%). With the exception of some categories, all other purchases automatically earn 1% cash back, without any limits. It is sure one of the best credit cards to build credit for students.
#2. Capital One SavorOne Student Cash Rewards Credit Card
The Capital One SavorOne Student Cash Rewards Credit Card stands out because it provides substantial rewards on some of the most popular spending areas for college students. You’ll get 5% cash back on hotels and auto rentals booked through Capital One Travel, 3% cash back on eating out, seeing a show, or watching a movie, and 1% cash back on groceries and other household essentials purchased with your Capital One card.
There is no yearly charge or additional cost for using the card abroad. Make sure you avoid the hefty interest and late payment costs by paying off your balance in full every month.
#3. Bank of America® Travel Rewards for Students credit card
For students who want to travel while in college, the Bank of America® Travel Rewards for Students is a fantastic option. Cardholders can earn 1.5 points for every dollar they spend, and those points can be redeemed for travel. It is one of the best credit cards to build credit for students.
Redeeming rewards as a statement credit might be an easy method to lessen the financial burden of planning a spring break trip or buying a plane ticket home. It’s great for students studying abroad because there are no fees for purchases made outside of the country.
#4. Discover it® Student Chrome
If you’re a student looking for all the benefits of a Discover card without the hassle of quarterly bonus rewards category activation, the Discover it® Student Chrome may be the best option for you. College students who fill up their tanks or eat out frequently would benefit from this card’s rewards program, which offers 2% cash back at gas stations and restaurants on up to $1,000 in combined purchases per quarter, then 1%. You can also automatically receive 1% cash back on all other transactions, which is unlimited.
What to Know Before Getting a First Credit Card
Despite how they may feel comparable, using a credit card differs greatly from using a debit card. Before applying for your first credit card, there are some considerations you should make.
Payments made using a debit card immediately deduct the necessary funds from the cardholder’s bank account. Your card will be refused or you may incur an overdraft fee if there are insufficient funds in your account to pay the purchase amount. Each time you use a credit card to make a purchase, you are effectively taking out a little loan. Your card issuer will front the cash to the store, with the understanding that it will be repaid by you. Monthly interest-free payments must be made in whole by the due date each month to avoid finance charges.
If your monthly purchases exceed your ability to pay off in full each month, you will incur interest charges on the remaining balance. According to the U.S. News database, the average APR for credit cards is now between 15.56% and 22.87%, so interest charges can pile up quickly. There is a minimum payment that must be made each month, but if you only make that payment and continue to use the card, your balance will continue to increase and your debt will grow. That’s why it’s crucial to fix a monthly payment amount you can comfortably afford.
Why Is Using Credit Cards to Build Credit Important?
Having a high credit score can help you in a number of ways, including securing a mortgage, getting a credit card, getting car insurance, and even getting hired. You might not be authorized for a specific financial product or might pay higher interest rates if your credit score isn’t outstanding or great.
Final Thoughts
The collateral for a secured credit card comes in the form of a deposit made by the cardholder. The amount you deposit determines how much you can borrow. A secured credit card is typically issued to a consumer with limited or no credit history. Although certain unsecured credit cards are available to those with poor credit, the required deposit can make a secured card more accessible. If you make responsible use of your secured card, you may be eligible for a no-deposit upgrade.
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