If you have little or no credit, getting your first credit card is a great way to start building it. Some features to look for in a starter credit card: no annual fee, rewards on everyday purchases and good approval odds for no credit individuals.Read on to learn more about the top credit cards to build credit.
There’s a first time for everything, and that includes establishing credit history with your first credit card. There are numerous credit cards designed specifically for people with no credit, but it’s important to choose a credit card you’re likely to qualify for and that matches your lifestyle.
“Getting your first credit card can be a great tool for establishing and building your credit profile,” says Krista Phillips, executive vice president, head of cards marketing, at Wells Fargo. However, all the credit card choices may be confusing if you have no experience with credit. Check out our picks of the best credit cards to build credit.
Capital One Platinum Secured Credit Card: Best for no credit history
Why we picked it: The best and safest way to learn about credit may be to open a secured credit card. With a secured card, your security deposit typically equals your initial credit limit, so the amount you put down determines how much you can charge on the card. One of the best secured cards out there is the Capital One Platinum Secured Credit Card. Depending on your credit score, the security deposit could be as low as $49, and your initial credit limit could be as high as $1,000.
A $1,000 credit limit may not sound like a lot to some, but a low credit limit is important for beginners to avoid overspending. The Capital One Platinum Secured Card also has a high APR — 30.49 percent variable — which might dissuade you from carrying over your balances. That can be a positive while building credit because paying your credit card bills on time and in full every month will typically help you improve your credit over time when coupled with other responsible credit habits.
- No annual fee, foreign transaction fee or penalty APR
- Low required security deposit ($49 to $200)
- Consideration for higher credit line after six on-time monthly payments
- High regular APR
Who should apply: If you’re a new cardholder with no credit history and no experience with credit cards, you may want to consider this card. Or, if you have bad credit and are looking to improve, you may also like this card.
Who should skip: If you have established good credit habits but made bad decisions previously that resulted in a low credit score, you can probably skip this one.
Discover it Secured Credit Card: Best secured card with rewards
Why we picked it: Maybe you like the idea of a secured card but wish you could earn some rewards on your purchases. If that’s the case, it may be worth considering the Discover it® Secured Credit Card. Not only is it a secured card with a maximum security deposit of $2,500, but it also provides cash back rewards. With this card, you’ll get 2 percent cash back at gas stations and restaurants (up to $1,000 in purchases per quarter) and 1 percent cash back on other purchases.
The Discover it Secured is a popular option because the minimum security deposit is only $200 (compared to the minimum $300 security deposit for some other secured cards). Plus, Discover will review your account monthly after six months to determine if you may graduate to an unsecured card. At the end of your first year, the issuer will also match all the cash back you earned from your first year of card ownership.
- No annual fee
- 2 percent cash back at gas stations and restaurants (up to $1,000 in purchases per quarter)
- Cashback Match as your welcome bonus
- Free access to FICO score, provided by TransUnion
- High APR (27.99 percent variable)
Who should apply: If your goal is to build up your credit while also earning cash back everyday purchases, chances are you would enjoy this card.
Who should skip: If you know the rewards will tempt you into overspending, you should keep looking for other cards.
Petal 2 “Cash Back, No Fees” Visa Credit Card: Best for flat-rate cash back
Why we picked it: Geared toward those with no credit, the Petal® 2 "Cash Back, No Fees" Visa® Credit Card offers a wide credit limit from $300 to $10,000. That $10,000 max is certainly higher than most starter cards, so be careful not to get carried away by buying more things on credit than you can afford. However, the higher limit may help you keep your credit utilization low because you could have more room to spend without significantly increasing your utilization rate.
The Petal 2 Credit Card offers rewards as well — 1 percent cash back on eligible purchases and up to 1.5 percent cash back on eligible purchases after you make 12 on-time monthly payments. Other select merchants may offer you even more cash back. That may not sound significant, but the flat-rate cash back earns more than you think.
- 1 percent cash back on eligible purchases (with the opportunity to earn up to 1.5 percent)
- No annual fee
- Roadside dispatch
- Money management app
- APR may be high (17.99 percent to 31.99 percent variable)
- Limited redemption options
Who should apply: If you have no credit history but a reliable income, you may want to apply. Also, if you want the flexibility of an unsecured card and would like to earn cash back, you’ll like this card.
Who should skip: If that 1 percent cash back on all purchases could be too tempting in terms of overspending (and subsequently result in credit card debt), you may want to sit this card out.
Discover it Student Cash Back: Best for students
Why we picked it: One of the best student credit cards is the Discover it® Student Cash Back. It comes with no annual fee and lucrative rewards – 5 percent cash back on rotating quarterly bonus categories (up to $1,500 per quarter, and then 1 percent) and 1 percent cash back on other purchases. Discover will also match your cash back at the end of your first year.
The Discover it Student Cash Back also offers a six-month 0 percent intro APR on new purchases (17.99 percent to 26.99 percent variable thereafter). The Discover it Student Cash Back can be an option worth considering if you’re looking to build credit as a student while you’re starting to earn money, perhaps for the first time.
- 5 percent cash back on rotating categories (up to $1,500 per quarter, then 1 percent)
- No annual fee
- No foreign transaction fee
- 0 percent intro APR for six months on new purchases (17.99 percent to 26.99 percent variable thereafter)
- Only for students
- Enrollment required each quarter to begin earning 5 percent cash back
Who should apply: If you’re a student who’s over the age of 18 and are just beginning to earn an income (even if it’s a part-time job at the campus coffee shop), you may want to consider this card. Or, if you’re a young adult who wants to build credit without sacrificing rewards, there’s a chance you will love this card.
Who should skip: If you’re a young adult but are not enrolled in a two or four-year education institution, you won’t qualify for the card. Or, if keeping track of rotating categories sounds like too much work, you may want to steer clear.
Comparing the best credit cards to build credit
|Card||Secured or unsecured||Rewards||APR|
|Capital One Platinum Secured Credit Card||Secured||N/A||30.49% variable|
|Discover it Secured Credit Card||Secured||27.99% variable|
|Petal 2 “Cash Back, No Fees” Visa Credit Card||Unsecured||17.99%-31.99% variable|
|Discover it Student Cash Back||Unsecured||17.99%-26.99% variable|
How to choose the best credit card to build credit
Major issuers offer a wide variety of credit cards, some with more than a dozen on the menu. Smaller financial institutions, such as community banks, credit unions, online lenders and retailers also offer credit cards.
With so many options, deciding on the best starter credit card can be tough. Here are some questions to ask yourself when looking for a card to start building your credit.
- Do you have any credit history? YEven with no credit card, you could have already established your credit history without a credit card. Say, with a student loan, for example, in which you are listed as either the primary or the cosigner. If so, the lender has been sending your activity to three major credit bureaus, TransUnion, Equifax and Experian. To know for sure, check your credit report for free through AnnualCreditReport.com.
- What is your credit score? If you have a loan under your name, you may also have a credit score. There are several ways to check your credit score, including buying your FICO score (the most commonly used score) from myFICO or getting a free score from a card issuer or one of the credit bureaus. Or, you might not have enough on your credit file to generate a credit score, so a decision by a credit card issuer would depend on other factors, such as income and collateral.
- Do you prefer a secured or unsecured card? Of the cards on this list, some are secured, and some are unsecured. Most credit cards are unsecured and offer greater flexibility. However, there is no shame in starting with a secured card. Secured cards can be a safe way to learn about credit and because they typically offer lower credit limits and little to no rewards, may dissuade you from overspending.
- Are you a student? If you’re a student enrolled in an educational institution, you should consider a student credit card. These types of cards are usually easier to qualify for sbecause they’re meant for young adults with no credit history. Plus, such cards offer rewards and typically don’t charge an annual fee.
How to use your first card to build credit
Whichever card you begin with, use it carefully to build your credit. “It’s important to establish healthy credit card habits from the get-go,” says Phillips. Mistakes will end up on your credit report and hurt your credit scores while you’re trying to increase them.
For a FICO score, the two most important factors are payment history and credit utilization. Given that, follow the tips below to keep your score healthy:
- Pay on time. At the end of the billing cycle you will receive a statement that includes the due date for your payment. Pay before that date to avoid a late fee. If you are more than one cycle behind, a late payment will appear on your credit report, which can damage your credit score.
- Mind the credit limit. It’s best to charge only what you can afford to repay in full at the end of the billing cycle because you won’t acquire debt or be charged interest. If you do want to use the card to pay for something in increments, try to keep the balance under 30% of the credit line to ensure a healthy credit utilization ratio.
- Keep the first account open and active. The longer you have it, the better for your credit history and scores. Even after graduating to a different card or adding an additional one, keep your first credit card active to help with your credit utilization.
- Apply for new accounts sparingly. You do not want to dilute the length of credit history by adding unnecessary new credit cards to the one that you have had for a while. You also don’t want to give lenders the impression that you’re desperate for money, so don’t apply for many loans and credit cards in a short span of time.
Your first card will help you build your credit, and when your scores are above the 670 mark (and have reached the good credit score range), the world of credit opens up to you. With a good credit score, you could qualify for the best travel cards or earn some of the most valuable sign-up bonuses. It all starts with your first credit card, so choose wisely.