The Best Credit Cards for Building Credit for Beginners

It is never too late to establish and build your credit score as it is an essential aspect of your financial life. From qualifying for better offers for loans and mortgages to getting a secured line of credit, the importance cannot be overemphasised. However, starting or rebuilding a credit history requires a series of solutions and steps; hence this article will assist you in finding the best credit card for building credit.

So we will look at the ideal credit cards for building a credit score, how to effectively use them, and finally what criteria to consider when selecting your first credit card.

Additionally, I will go through secured credit cards, unsecured credit cards, and even reward credit cards as well as a few pieces of advice that would be useful.

What Are the Best Credit Cards to Build Credit?

The best credit cards with which to build a credit history aim at assuring the establishment of a credit history that will be beneficial in the future.

Based on several situations where some individuals are trying to establish using a credit card for the first time while others are rebuilding theirs, there are several options available. For example:

• Secured credit cards: This form of credit card requires an upfront deposit for collateral. In essence, this credit card is perfect for people who do not possess a credit history.
• Unsecured cards: It’s a type of credit card which does not need a deposit as security. But again the card may require higher interest rates or fees if your credit is limited.
• Rewards credit cards: Some companies reward people with points or cash back when they use the card as a form of credit, and therefore it is advantageous if you have credit card expenses and get something in return.

Top Picks for Secured Credit Cards

For those looking to establish their credit history, a secured card is most likely to be the best option for them given the conditions. For instance, in order to open a secured credit card, a security deposit is provided. This acts as the card owner’s credit limit. For example, if you make a £200 deposit, the card owner’s limit will also be £200.

This makes it easier for issuers to take the risk even when the person looking to request a credit card doesn’t have any credit history or has a fair credit history.

And if that’s not enough, secured cards are reported to the major three bureaus which are Experian, Equifax and TransUnion, which will ultimately help you in building your credit history.

The following are some of the cards which can prove useful in establishing the credit history.

1- Discover it® Secured Credit Card

• Deposit: $200 minimum.
• Rewards: 1% cash back on several purchases, 2% cash back on the first £1,000 spent at restaurants and petrol stations combined purchases per quarter.
• APR: 22.99% Needing/Wishing APR
• Features: A customer will face no annual fees, have free access to their FICO® Credit Score, and automated assessments will take place every 8 months to see if they can be upgraded to an unsecured card.

2- Capital One Secured Mastercard

• Deposit: a minimum of £200.
• APR: 26.99% Variable APR.
• Features: No annual payment, the ability to increase the limit once the first 5 of their monthly payments are fulfilled according to schedule.

3- OpenSky® Secured Visa® Credit Card

• Deposit: $200 minimum.
• APR: 19.64% Variable APR.
• Features: Accepts without Credit Check, reports to 3 major Credit Bureaus, and yearly fee is not required.

When selecting a secured card, you should pay attention to one which requires low deposits, no yearly fee, and also shows how to progress to being issued with an unsecured card after building the credit history.

Unsecured Cards for Building Credit

After recording positive growth through the use of a secured card, there is a chance you can apply for an unsecured credit card that doesn’t require a deposit. If you want to build credit with these cards offering good features but not much initial requirements, these are just the right cards for you.

1. Capital One Platinum Credit Card

   • Annual Fee: $0.
   • APR: 26.99% Variable APR.
   • Credit Limit: £300 but might be increased after waiting for six months.
   • Features: Well, the card is not of any reward point benefit, but it is good for those who do not want to overspend.

2. Chase Freedom Unlimited®

   • Annual Fee: Zero Annual Payment
   • APR:  Interest 20.24% to 28.99% Variable APR
   • Rewards: on all purchases the cardholder must have at least 1.5% cashback.
   • Features: Good for customers who wish to earn while using the card and enjoy zero annual payment while at the same time working on building up their credit score.

3. Petal® 1 “No Annual Fee” Visa® Credit Card

   • Annual Fee: $0.
   • APR: Between 19.99% – 29.49% Variable APR
   • Credit Limit: Starts at $500.
   • Features: No Annual Payment. No late payment fee. Excellent Opportunity to get a credit account without a credit score.

When looking for unsecured credit cards, always review the credit card offers first because this type of card is sensitive in terms of fulfilling standard requirements set by the lender. Most Unsecured cards have higher APRs thus every time you have to only aim for maxing out all your balance to avoid over paying on unneeded interest.

Rewards Credit Cards That Help Build Credit

If you have a credit history and want to continue building it with a chance to earn rewards, then a rewards credit card may be appropriate for you. Such cards allow users to earn certain benefits on spending, such as earning points or receiving miles which can be redeemed for gifts or travel.

The following are some of the best rewards credit cards for building credit:

1. Discover it® Cash Back

   • Rewards: 5% cashback on limited categories even in alternate quarters on a minimum repayment of a sum not exceeding £1500, 1% cashback on every other purchase.
   • Annual Fee: $0.
   • APR: 22.99 percent APR that is variable rate.
   • Features: In the first year, cashback is automatically increased to match the provided amount; there is no cost for annual membership.

2. Blue Cash Everyday® Card from American Express

   • Rewards: 3% cashback is available for use with supermarkets located in the United States of America, 2% cashback with American fuel stations and specific department stores, and 1% with other purchases.
   • Annual Fee: $0.
   • APR: The American Psychological Association has various APR offers, including 19.24% to 29.24%
   • Features: Membership does not require payment of an annual fee, and there are rewards in the form of cashbacks for regular expenses.

How Can a Credit Card Help You Build Credit?

A great way to establish credit history is by utilising a credit card, when done correctly. Let’s expound further now:

1. Credit Reporting: The good thing about credit card companies is that they usually report to all three credit bureaus, thus facilitating the ability to build a good credit history.
2. Payment History: Credit scores are weighted by how responsibly on-time payments are made, thus credit cards allow responsible spending to be shown to potential lenders.
3. Credit Utilization: Time spent owing money on a credit card while the limit is still low should always be below 30%, since this is key in establishing credit score.
4. Credit Mix: Putting a credit card into good use increases the chances of an individual’s score being higher due to the higher types of credit.

Understanding Credit History and Scores

How one’s credit history affects credit scores is the range a factor that needs to be grasped to ensure that activities to build credit can be executed accordingly. There are components on which the score is evaluated:

1. Payment History (35%): The percentage is self-explanatory, positive history increases the score whereas missed payments lead to a reduced score.
2. Credit Utilization (30%): The ratio of how much is owed to the amount allowed to be owed is crucial. Ideally, if ratios below 30% are maintained, the score will improve.
3. New Credit (10%): Multiple new accounts opened at the same time can result in a decrease in credit score.

What Should You Look for in a Credit Card to Build Credit?

It will also be useful to take into account the following when selecting a credit card for construction purposes:

1. Credit Limit: More exposure enhances flexibility, however, always keep in mind to slow your spending to lower your debt to equity ratio.
2. Fees: You should seek a credit card that does not have annual membership charges, has reasonable penalties for delayed payments, and offers a profitable cost of finance.
3. Interest Rates: If you are the type of person who has balances all the time, then you need to get a credit builder credit card with low rates to incur less in costs.
4. Rewards: If you are able to be responsible with your credit then it would be good to get a rewards credit card that allows you to earn cashback or points whilst you are building your credit.
5. Credit Reporting: The credit card that displays on your report once issued should be fully active and visible across all the three major credit bureaus to enhance your credit history.

Can You Build Credit with a Secured Card?

Of course yes! Secured cards also increase your credit score, furthermore, if you make payments on time and honour your credit limit then you can make good use of a secured card even if it is a little hard to do. When dealing with secured cards, timing is key! It is possible, and many of them allow you to switch to unsecured cards after some time has passed.

Common Mistakes to Avoid When Building Credit

Mistakes do happen and when they do happen, they will tend to cost you. Falling into the categories below will hurt your credit score:

1. Neglecting Payment History: Missing payments will completely damage your credit-affiliated history. Always ensure to make at least the minimum payment in time.
2. High Credit Utilization: Leaving a balance too high on the card in relation to the limit will damage your credit score. Try not to go above 30%.
3. Ignoring Card Offers: Ensure to look for the ideal credit card that suits the goals that you have set financially. Never agree to a card that isn’t the one for you.
4. Overlooking Fees: Ensure to check the annual fees, late payment fees, and various other fees that may contribute to the damage being done while building your credit.

My Opinion

If you happen to be in want of building your credit or trying to redeem your credit, this credit card for building credit can be immensely helpful.

A secured credit card is an option to include if you are a beginner, but concerning non-secured cards or even a rewards credit card it can be availed if one possesses a reasonable amount of credit history.

Keeping an eye on your credit is immensely vital as it allows you to make the right moves by paying your bills on time and deciding a usage that is firm yet not too high.

In concord with these trademarks and approaches, you will be able to optimise in a strong credit history and enjoy the enchantment with a sense of financial independence.

Happy credit building!

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