Best Credit Cards to Build Credit
Your credit score is an incredibly important number. Credit scores are used for a huge array of things these days, everything from loans and mortgages to job and apartment applications. That means building your credit score has never been more important.
This article and FAQ will help you understand how to use a credit card to build credit. We’ll go over the relationship between credit cards and credit scores, the benefits and drawbacks of using a credit card to build credit, and then answer some of the most common questions people have about credit cards and credit scores.
Use this information to make informed financial decisions about your credit history. Make smart choices and pick the best credit card to build your credit.
The following are the best credit cards available in the market today to help build credit.
Capital One Platinum Credit Card
The Capital One Platinum Credit Card is a zero annual fee credit card. It is a great choice for those consumers who are trying to build their credit using a credit card. The annual variable rate for this card is at 26.96%, which is pretty competitive. This credit card is also long recognized as one of the best options for newcomers (or those with no credit history), as far as unsecured credit cards are concerned.
The card comes with a “no-frills” offer of zero annual fee, which in itself is rare to find these days. Another reason to consider using this card is the fact that those with limited credit experience can qualify for it. Despite that, you can have access to a higher credit line when you manage to pay your bills on time for the first five months. All consumers are able to apply for this card even if you are not an existing Capital One customer. Other benefits for using this credit card to build credit is the lack of penalty APR and $0 balance transfer fee.
When used responsibly, this card is an inexpensive way to build your credit.
Discover It Secured Credit Card
The Discover It Secured Credit Card is another card option for building credit without paying annual fee. However, this type of credit card might be best suited for consumers who are trying to re-build their damage credit (versus those who are starting their credit from scratch). It has a host of other features and benefits that differentiate it from credit cards offered for people with bad credit.
The APR for Discover It Secured Credit Card is a variable 25.24%. Aside from having zero annual fee, you can also earn cash back and rewards from this card (and pretty good ones, too). The introductory APR for balance transfer is 10.99% (within 6 months), plus a 3% balance transfer fee. Because it is a legitimate credit card, not debit or prepaid card, it is a legitimate way to build your credit history with the credit reporting agencies. Within 8 minutes of use, if your record is good, you have the opportunity to be transferred to an unsecured line of credit.
Journey Student Rewards from Capital One
Another Capital One credit card is included in this list, but this time it is specific for students who are building their credit. The Journey Student Rewards from Capital One is designed specifically to overcome the challenges of building your credit history as a student. To facilitate in that process, this card comes with zero annual fee (or any foreign transaction fee). The credit card comes with a variable APR of 26.96%.
The Journey Student Rewards from Capital One also offers great rewards, which provides more incentive to use it for building credit. You can get 1% cash back on every purchase. If you pay your bills on time, you can increase that to 1.25% each month! Within the first 5 months of making on-time payments, you can raise your credit limit. The fact that you won’t have to pay annual fee or foreign transaction fees puts you in a good position to meet your monthly payments. When you make on-time payments, you can improve your credit.
Capital One QuicksilverOne Cash Rewards Credit Card
The Capital One QuicksilverOne Cash Rewards Credit Card is considered as the best starter card in terms of the rewards that you can enjoy. It is a great opportunity to enjoy some rewards while building your credit. With $39 in annual fee, you can expect 26.96% in variable APR with this credit card. Thankfully, there is 0% penalty APR and no balance transfer fees either.
If you use this card for taking out cash advance, you will be charged 3% equivalent of the cash advance amount. Despite the fact that you are paying an annual fee for this card, it is a good option for those who are unable to qualify for an unsecured credit card. The rewards offered here gives you the chance to make the most of every purchase, especially as you use them for building credit.
Discover It Student Cash Back
Another great credit card option for students is the Discover It Student Cash Back credit card. Experts believe this is the best starter credit card for college students. With a 0% annual fee, the variable APR ranges from 15 to 24%. You will not be forced to pay a penalty on your first late payment. But in order to build your credit with this card, make it a point to pay your bills on time (and in full).
To reward good payment behavior, the Discover It Student Cash Back has plenty of offers and rewards in store. One example is the Good Grade Rewards, which offers $20 statement credit for students who earn 3.0 or higher GPA at the end of each school year! You can also get free credit reports about your FICO credit score so you can monitor your credit standing.
OpenSky Secured Visa Credit Card
The OpenSky Secured Visa Credit Card is developed primarily as a powerful credit-building tool. During your application for this card, your credit won’t be checked or required. That means, you can start with building your credit history (whether you have none or are in the process of re-building it) using this credit card.
Your credit limit for this card will be determined based on your refundable deposit, which can be anywhere from $200 to $3,000 (though subject to approval). You can use the card for purchases or making bills payments. As long as you are able to make payments each month, you can continue to build your credit or fix damaged credit. Your activity on this card is reported to the three major credit bureaus. This is vital so you can build on and improve your credit score, whichever applies.
Discover It Student Chrome
Another great credit card to use for students building credit is the Discover It Student Chrome. With no annual fee, you can use it to build your credit at no expensive cost. It is also a great opportunity to earn rewards while you are building your credit through purchase and payments using this card. All cardholders of the Discover It Student Chrome will earn 2% cash back when you spend at least $1,000 on restaurants and gas stations. For any other purchases, 1% cash back will apply.
As a bonus, you won’t have to pay any foreign transaction fees. To entice students, anyone who holds a GPA of 3.0 and above will get extra $20 each year.
Capital One Secured Mastercard
If you are building your credit after it has been damaged, the Capital One Secured Mastercard is the best card to use. This is a secured credit card, so you have to settle a minimum security deposit but you won’t be paying any annual fee to use this card. This will give you the opportunity to rebuild your credit history with responsible use and on-time payments. The required security deposit on this card will be based on your credit-worthiness, so it could be $49, $99, or $200. Once you are approved, your initial credit line will be equivalent to that deposit.
Within the first 5 months of making timely payments on your card, you immediately qualify for a higher credit line. The credit card comes with a variable APR of 26.99%. With a small initial credit line and plenty of rewards for making payments, this card is a good way to develop good financial and spending habit. Eventually, this can help you rebuild your credit again.
Wells Fargo Cash Back College Card
If you’re a college student, building credit is important so you can get an early start. The only downside to this card is that it is available only to existing Wells Fargo customers. On the other hand, if you have an existing Wells Fargo account, you can use this opportunity to build your credit while you are in college as it comes with $0 annual fee.
The Wells Fargo Cash Back College Card also offers plenty of rewards including a 3% cash reward on grocery, drug store, and gas purchases (within the first 6 months). For all other purchases, you can get 1% cash reward. There are also flexible reward redemption options and low intro APR.
Citi Secured Mastercard
Building your credit with the right card is important to improve your financial situation. This is precisely the purpose for creating the Citi Secured Mastercard option. It gives consumers the opportunity to use the card in order to re-establish credit and make improvements to your history. This card comes with zero annual fee, which means you can focus on paying only the purchases on your card.
Unlike prepaid cards, the Citi Secured Mastercard sends monthly notifications to the credit bureaus. You can use this as an opportunity to provide a good payment record. Before you can qualify for this secured credit card, you must pay an initial deposit of $200 (minimum). It offers auto payment options so you won’t miss a single payment schedule.
Understanding the Relationship Between Credit Cards and Credit Scores
Before you can determine the best credit card to build your credit, you need to understand the relationship between credit cards and credit scores. We’ll go over how credit scores work and explain how credit cards affect your credit score. This will give you a better idea of how you can use a credit card to build credit.
How Credit Scores Work
A credit score is a numerical representation of how likely you are to default on a loan or line of credit. In other words, it says how likely you are to pay your bills.
That’s why credit scores are so useful to lenders and creditors. It tells them how much of a risk you are for default. That means they can make informed decisions about approval and set interest rates appropriately.
There are five major components that go into determining a credit score. These are:
- Payment history
- Credit utilization
- Length of credit history
- Credit mix
- New credit
The first entry has the largest impact on your credit score – 35% of your score comes from your payment history. That means a record of on-time payments will have the greatest impact on your score. It also means that missed or late payments, charge offs, and defaults will dramatically lower your score.
The second item is credit utilization. This category makes up 30% of your credit score. Credit utilization refers to how much of your revolving credit you’re using compared to how much you have. Revolving credit is things like credit cards, where you have a line of credit you use and then pay off. Things like loans where you receive money up front and then pay it back don’t fall into this category.
If you have a credit card with a $1,000 limit and you have a $100 balance, then you’re using 10% of your revolving credit. The lower your credit utilization, the better your credit score will be. That’s because a low credit utilization signals that you’re not currently facing any financial difficulties and that you use credit responsibly.
The length of your credit history makes up 15% of your credit score. Your credit history is important because the more history the credit reporting agencies have, the more accurately they can predict how likely you are to pay bills. That means you shouldn’t close accounts once you’ve paid them off, as that could actually hurt your score.
Your credit mix makes up 10% of your credit score. This looks at your ability to handle different kinds of credit. For example, auto loans, student loans, credit cards, and mortgages. The better your credit mix, the better your credit score will be.
Finally, new credit makes up 10% of your score. This includes hard inquiries or hard credit checks that you get when you apply for new credit. The more hard checks you have on your report, the lower your score will be. That’s because requesting new credit is a sign you’re having money issues, which means you’re at a higher risk for default.
It’s also important to understand how different credit report entries shape your score. Negative entries will age off your report. Most things fall off your credit report after 7 years. The only exceptions are credit inquiries, which fall off after 2 years, and liquidation bankruptcies, which stay on your report for 10 years.
In addition to falling off after a period of time, the older a negative entry is, the less it’s factored into your score. That means it’s not only possible to recover if you have a damaged credit history, but that it will actually happen faster than you think.
It’s also important to note that it takes some time to get a credit score at all. You must have six months of account history before you can get a FICO score. That means if you don’t have a credit score, getting a credit card won’t immediately establish one for you.
How Credit Cards Affect Credit Scores
Now that you have a better understanding of how credit scores work, it’s time to look at how credit cards can impact your credit score.
Credit cards actually touch several of the categories that are factored into your score. The impact your payment history, credit utilization, credit mix, and length of credit history. That means credit cards can have a huge impact on your credit score.
The best way to build credit with a credit card is to make regular payments, pay off the entire balance on your card, and avoid closing accounts. It’s surprisingly important to avoid closing accounts. This is because doing so reduces the length of your history. It also lowers the amount of credit you have available. That means that your credit utilization can go up if you have a balance.
Benefits and Drawbacks of Using Credit Cards to Build Credit
This section covers the benefits and drawbacks of using credit cards to build credit. There’s a lot of information here, and it’s important to understand the potential ways that using a credit card can affect your credit before you count on one to build your credit score.
There are four main benefits to using a credit card to build your credit history. They are:
- Credit card definitely report payments
- Helps with multiple aspects of credit score
- Lots of options for credit cards
- Secured credit cards mean anyone can get one
The first benefit is that credit card companies always report payments to the credit reporting agencies. This is vital because companies aren’t required to report payments in most cases. That means you might not have any credit history even if you’ve been paying utility and rent bills for years.
On the other hand, credit cards always report. That means getting a credit card will assure that you have a payment history and will boost the length of your credit history.
Also, a credit card touches on multiple aspects of your credit score. It increases the amount of credit available, which can lower your utilization. On-time payments will give you a good payment history, and keeping an account open and active will help increase the length of your credit history. Finally, credit cards are a great way to add revolving credit to your credit mix so you can show you’re able to handle lots of different kinds of credit.
There are also lots of options for credit cards. That means you’re able to pick and choose to find the best card for you. You can get different rewards and benefits that improve your life. Cash-back cards will make your purchases cheaper and save you money, travel rewards cards can help you get the vacation of your dreams, and so on.
Finally, secured credit cards mean that anyone can get a credit card, even someone with a bad score or no history at all. A secured credit card works in a very simple way. You make a security deposit with the credit card company. The size of your deposit will be your credit limit. That protects the credit card company in case you default. Then, you can pay off your card every month to build your credit history and score. Eventually, you’ll even be able to convert your secured card into an unsecured card and get your money back.
There’s no such thing as a free lunch. This adage applies to credit cards as well. While there’s several benefits to using a credit card to build your credit, there are potential drawbacks as well. These drawbacks are:
- Can be hard to qualify for better credit card with no credit
- Interest rates on card can be high
- Requires good financial discipline to work
First, if you don’t have a credit score or have a bad credit score, then you’re going to have a hard time getting approved for the better credit cards on the market. That means you might not have access to things like cash back or travel rewards.
Second, the interest rates on credit cards can be very high. As a result, you can find yourself rapidly building a credit card balance that you struggle to pay off. Once you leave a balance on a card, you’ll pay interest on any balance you have until the entire thing is paid off. That can cause you to spend a lot of money to use a credit card for purchases.
Finally, if you want to build credit with a credit card, then you need to have good financial discipline. Leaving a balance on your card will lower your credit score, as it increases your credit utilization. Moreover, if you build up a large balance, then your payment will go up. That makes it harder to make your payments on time, which can hurt your score.
A credit card can be a huge source of debt if it’s not used responsibly. Therefore, you should make sure to set a budget that allows you to pay off your credit card balance each month. You shouldn’t use your card for splurge purchases if you don’t know how you’re going to pay them off.
Responsibility is the Key – Don’t Let Your Credit Card Hurt Your Credit Score
In short, the most important thing to know about using a credit card to build your credit is that responsibility is key. After all, that’s what a credit score measures. If you pay your balance off on time and avoid excessive spending, then a credit card can be an excellent way to build credit. Otherwise, it could tank your credit score and lead to debt.
Credit scores and credit cards can be confusing. That’s why we put together this helpful FAQ. Use this information to answer all the questions you have and find the best credit card to build your credit score.
General Questions about Building Credit with a Credit Card
This section covers general questions about building your credit score with a credit card. Use this information to establish a good foundation so you can move on to more advanced questions.
How to Build Credit with a Credit Card?
You can build credit with a credit card by making on-time payments and paying off the entire balance of the card. This improves your payment history and keeps your credit utilization low.
How to Build Credit with a Credit Card Fast?
There’s a limit on how fast you can build credit. You need at least 6 months of payment history to generate a FICO score. Paying off the whole balance every month for at least 6 months will help you build an excellent credit score.
Do Secured Credit Cards Build Credit?
Yes. Secured credit cards are actually one of the best ways to build credit, as they’re open to everyone and report payments and balances to the credit reporting agencies.
What Is the Best Credit Card to Build Credit?
All credit cards will build credit in the same way. That means you should focus on finding the best credit card you can get approved for. Focus on lower interest rates and helpful rewards programs if you can.
Does a Debit Card Build Credit?
Not currently. Future scoring models may take debit card use into account, but the current FICO model doesn’t look at debit card when determining your credit score.
How to Build Credit with a Secured Credit Card?
A secured credit card will help you build credit if you pay off the entire balance every month and don’t close the account. It also increases your credit limit which can lower your credit utilization.
Do You Need a Credit Card to Build Credit?
No, you don’t. You can build credit with bills and loans that report to the major credit reporting agencies. However, credit cards can help because the impact so many aspects of your score.
Do Store Credit Cards Build Credit?
They do. As long as you pay off the balance on-time a store credit card can be a great way to build credit. They’re easy to get approval for, and they all report to the major credit reporting agencies.
Do Gas Credit Cards Build Credit?
They do. Gas credit cards will report your payments to the credit reporting bureaus. They’ll also increase your credit limit and lower your utilization.
Do Prepaid Credit Cards Build Credit?
That depends what you mean. A prepaid gift card doesn’t help you build credit. However, a secured credit card that has a revolving balance will help you build credit in several ways.
Which Credit Card Should I Get to Build Credit?
All credit cards will build your credit the same way. Therefore, you should focus on which credit card offers the best deal for you. If you’re having problems getting approved, then a store card or a secured credit card are your best options.
Do Business Credit Cards Build Personal Credit?
That depends on if the business credit card is in your name or the business’s name. If the card’s in your name, then yes. Otherwise, no.
How Fast can You Build Credit with a Credit Card?
That depends on lots of different factors. Everyone’s credit score is unique, and so credit cards will affect it differently. Raising your credit limit and lowering your utilization will cause a solid bump in your score. However, if you don’t have a score, then it will take at least 6 months.
Do All Credit Cards Build Credit?
As long as you make on-time payments and don’t carry much or any balance on them, then yes, all credit cards will build credit.
What Is a Good Starter Credit Card to Build Credit?
A secured credit card or a store credit card are the best starter card options to build credit. They’re easy to get approved for and will ease you in to the process of managing credit.
What Are the Best Credit Cards to Build Credit?
The best credit cards to build credit are the ones that offer you the lowest interest rate. That’s because a lower interest rate will help keep your bills low. As a result, it’s more likely you’ll be able to pay your bill on time, improving your credit.
Should I Get Another Credit Card to Build Credit?
Maybe, that depends on lots of different factors. You should talk to a certified credit expert about your particular case to see if a new card is the best option for you. It could help by lowering your utilization, but it could hurt as well.
Does Paying the Minimum on a Credit Card Build Credit?
It does. However, only paying the minimum means that you might be increasing your credit utilization, which will cause your score to go down. If you’re carrying a balance, always make sure you spend less than the minimum payment on the card for your next billing cycle.
How to Build Credit History with Credit Card?
You can build a credit history with a credit card by getting one and paying the bill every month. A secured credit card or a store card are your best options for approval.
How Long to Build Credit with Credit Card?
It will take 6 months of payment history before you get a credit score at all. If you’ve already got a score, then it depends on the other factors in your credit history.
Does Having Multiple Credit Cards Build Credit Faster?
Sometimes yes, sometimes no. How you handle your credit cards is more important than the number of cards. Don’t take out more credit than you can cover to ensure your score grows.
How Much to Spend on Credit Card to Build Credit?
Any amount of spending on a credit card will help you build credit as long as you pay on time and pay off the entire balance.
How Do Prepaid Cards Build Credit?
Prepaid debit cards don’t build credit. A secured credit card will build credit by increasing your credit limit and creating a record of payments.
Are Store Credit Cards Good for Building Credit?
They are. They affect your credit just like a major credit card will. They’re also easier to get, so they’re a good option for people just starting off.
Should I Get a Second Credit Card to Build Credit?
Maybe. That depends on the exact nature of your credit history. A certified credit expert can give you more information about your case.
Does a Joint Credit Card Build Credit?
Yes. A credit card will build credit for any authorized user on the account. That user will get the same payment and utilization information as the primary cardholder.
Questions About Credit Card Payments and Building Credit
This section covers questions about paying your credit card bill in order to build credit. It will help you understand how your payments will shape your credit score.
When Should I Pay My Credit Card to Build Credit?
The best time to pay your credit card to build credit is a couple of days before your billing cycle ends. That way you’ll keep your utilization low and still show an on-time payment.
How to Pay Off Credit Card to Build Credit?
It can be hard to pay off a credit card. Smart budgeting is essential. You can also look for debt consolidation loans. These will convert your credit utilization to installment debt, which can help your credit score.
How to Pay Credit Card Bill to Build Credit Score?
Just paying the bill will build your credit score. Paying the bill 2-3 days before the statement will keep your reported utilization low while building a history of on-time payments.
How to Use a Credit Card Wisely to Build Credit?
Never charge more than you can afford to completely pay off. Keeping a low or zero balance and paying on-time are the best ways to build credit with a credit card.
Questions About Specific Cards
We’ll answer questions about specific credit cards in this section. Use it to help decide if a specific credit card is the best way for you to build your credit score.
Will American Express Serve Card Build Credit?
No, the American Express serve card is a pre-paid debit card, not a credit card. It won’t affect your credit score.
Does a Target Red Card Help Build Credit?
The Target REDCard Mastercard will, but the Target REDCard debit card won’t, as debit transactions don’t factor in to a credit score.
Does The Bluebird Card Build Credit?
No, Bluebird is a debit account, not a credit account. Therefore, it doesn’t report to the credit monitoring agencies and can’t build your score.
Does Green Dot Card Build Credit?
As long as it’s a Green Dot credit card and not a Green Dot pre-paid debit card, then yes. Green Dot reports to the three major credit reporting agencies, so it will build your credit.
Does Amazon Store Card Build Credit?
It does. The Amazon Store card is revolving credit. It reports to the three credit reporting bureaus and affects your total credit utilization limit.
Does a Best Buy Card Build Credit?
Yes. Best Buy cards payments and balances are reported, so a low balance and on-time payments will build your credit.
Does Kohls Charge Card Build Credit?
It does. Kohls charge cards report payments and balances to the credit bureaus. That means they establish a credit history, affect your credit utilization, and show on-time payments.
Does Walmart Money Card Help Build Credit?
No, the Walmart Money card is a prepaid debit card and doesn’t build credit history. You’ll need a different Walmart card.
Does Victoria Secret Credit Card Build Credit?
Yes. The Victoria Secret card is a store credit card. It increases your credit limit and payments are reported to credit monitoring agencies, so it will build your credit.
Does a Macy’s Card Build Credit?
Yes. Macy’s cards are a form of revolving credit that impact your credit score, so you can use them to build credit.
Does Amazon Rewards Card Build Credit?
Yes. The Amazon rewards card is a credit card with a revolving credit limit. Payments on this card will be reported and boost your score.
Does Serve Card Build Credit?
No. Serve is a prepaid debit card. That means it doesn’t report to credit monitoring agencies.
Is Discover Card Good to Build Credit?
It can be. The type of card doesn’t matter as much as how you handle it. Focus on cards with lower interest rates to ensure you’ll make your payment on time.
Does Amex Gold Card Build Credit?
It does. Amex Gold reports payments and balances to credit monitoring agencies, so it will build your credit history and score.
Does a NetSpend Card Build Credit?
No, NetSpend is a prepaid debit card and doesn’t report to credit reporting bureaus, so it won’t build your credit.
Does Military Star Card Build Credit?
It does. Military Star is a revolving credit Mastercard. That means it will report payments and credit utilization and build credit.
Does Capital One Credit Card Build Credit?
A Capital One card will build credit. It’s a major credit card and reports all payments and balances to credit reporting agencies, building your credit score and history.
Does PayPal Credit Card Build Credit?
A PayPal credit card will build credit, but PayPal credit doesn’t. That’s because the card reports payments and balances, but PayPal credit doesn’t report.
Does GameStop Credit Card Build Credit?
Yes, GameStop credit cards are reported to credit reporting companies, so it will establish a payment history, credit utilization, and credit history for you.
Does Rush Card Help Build Credit?
No, Rush is a prepaid debit card. It’s not a revolving line of credit and doesn’t report to any of the major credit monitoring agencies.
Financial Advisor - Best.CreditCard
Michelle is part of our expert team of financial advisors with a proven track record in the credit card industry. After graduating with an Economics Degree focusing on Personal Finance, she got involved with several credit and debt counseling startups.