Which Credit Cards are Best for Building Credit?
August 22, 2018
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Building credit can be difficult when you’re first starting out, and it may even seem impossible. It’s not always easy to find a bank willing to give you a credit card or line of credit when you don’t have a credit history, after all. And, you may not be able to get a cosigner, either.
Fortunately, some banks offer credit cards that are ideal for beginners just getting their feet wet. These beginner cards, also called secured credit cards, allow individuals with thin credit profiles to get a credit card that lets them build a credit history over time.
But, there’s a catch. Unlike unsecured credit cards that offer a line of credit without collateral, secured credit cards require you to put down a cash deposit. This cash deposit is typically equal or close to the credit limit you’re offered and is refundable when you close or upgrade your card in good standing.
5 Credit Cards Perfect for Building Credit
You may be wondering why you would bother getting a credit card that requires a cash deposit that’s equal to your credit limit. The answer is simple. These cards report your credit movements to the three credit reporting agencies — Experian, Equifax, and TransUnion. This reporting can help you build a solid credit history that makes it possible for you to upgrade to an unsecured credit card (without a cash deposit) later. Creating a credit history that shows you can keep up with monthly payments will also help you grow your credit score, which is an important measure of your overall financial health.
If you’re ready to build credit but don’t know where to start, a secured credit card may be your best bet. Here are some of the best to consider and how they work:
Capital One® Secured MasterCard®
The Capital One® Secured MasterCard® is one of the best options on the market due to its notable lack of fees. In addition to not having an annual fee, this card offers 24/7 online account access and account management tools.
You’ll start with an initial credit line of $200 after making a cash deposit between $49 and $200 based on your creditworthiness. However, your credit line may be raised without any additional deposits after you make on-time payments for at least five consecutive months.
In summary, the Capital One® Secured MasterCard® offers an easy way to build credit without an annual fee. Since it’s a MasterCard, it’s accepted by millions of retailers and merchants worldwide.
The First Latitude Mastercard® Secured Credit Card
Another smart secured credit card option is offered through Synovus Bank. The First Latitude Mastercard® Secured Credit Card comes with no annual fee and may offer a line of credit up to $2,000 with an appropriate deposit. There is no minimum credit score required to get this card, and you don’t have to have any credit history, either. For that reason, this is one of the easiest cards to qualify for.
The First Latitude Mastercard® Secured Credit Card reports to all three credit reporting agencies, making it an ideal tool to build credit. You also get 24/7 online access to your account, and the perks that come with carrying a MasterCard.
OpenSky® Secured Visa® Credit Card
If you wish you had a Visa card but need to start with a secured credit card, the OpenSky® Secured Visa® Credit Card is one option to consider. This card is available to all applicants who apply with no credit check required. The refundable deposit you supply becomes your credit limit, and you can get started with as little as $200.
While the OpenSky® Secured Visa® Credit Card does have a $35 annual fee, you do get the comfort and security of having an authentic Visa credit card. And, like others on the list, this card reports to all three credit reporting agencies so your payments will help you build credit quickly.
Green Dot primor® MasterCard® Classic Secured Credit Card
Green Dot Bank offers its own secured credit card that can be a valuable tool when it comes to building credit. The Green Dot primor® MasterCard® Classic Secured Credit Card is available with no minimum credit score or credit history, and it reports your credit movements to all three credit bureaus.
If you’re worried about the signup process, the Green Dot primor® MasterCard® Classic Secured Credit Card promises a fast, easy process that you can complete entirely online. Credit lines are available from $200 to $5,000, and fixed interest rates can run as low as 13.99% depending on your creditworthiness. Keep in mind, however, that this card does charge a $39 annual fee.
Discover it® Secured
Finally, don’t forget to consider the Discover it® Secured — a newer secured card offering from Discover Bank. This card comes with no annual fee and a free FICO score on your monthly statement every month. A cash deposit is required as collateral, but you can build credit as your payments are reported to the three credit reporting agencies.
One factor that helps the Discover it® Secured stand out is the fact it offers rewards. Currently, you’ll earn 2% cash-back on your first $1,000 in combined spending at restaurants and gas stations each quarter along with 1% cash-back on all other purchases. Best of all, this secured credit card comes with no annual fee.
The Bottom Line
If you want to build credit but can’t find a bank willing to give you a shot, you may have to start with a secured credit card. While putting down a cash deposit as collateral is never ideal, this could be the best way to get on a path toward building a history of responsible credit use.
It’s also important to remember that secured cards don’t have to be forever. Once you’ve proven your ability to use credit responsibly, you have the option to cancel your secured card and get your deposit back. And, once your credit score is high enough, you can qualify for a credit card that offers real perks like travel rewards or cash-back.
Building credit isn’t always easy — especially at first. But everyone has to start somewhere, and this list of cards may be just what you need to get in the game.