Best Credit Cards For Building Credit
To some people, a credit card is a scary concept. Maybe you’ve been taught by your parents that using a credit card is irresponsible at best. Maybe you yourself have struggled with credit card debt before, or know someone who has.
A credit card is simply a tool. Like many tools, using it wisely can benefit you, and using it recklessly can harm you. Whether your credit history is less than perfect or just beginning, responsible use of a secured credit card can help you safely build that history and strengthen your overall financial health.
Before you apply for a credit card, however, understanding how credit cards work is a crucial first step towards building responsible financial habits.
Understanding Credit Cards and Credit Scores
Your credit score is calculated based on a number of factors:
- Your payment history
- The amounts you owe
- The length of your credit history
- Any new credit
- The different types of credit in use
A credit card is a type of line of credit, which means you can borrow up to a set limit. As you pay off your balance, more of your credit becomes available for use again. This is considered a different type of credit from an installment loan with a fixed rate and term, such as an auto loan.
Practicing good credit card habits – such as keeping your overall balance low and making monthly payments on time – can contribute to a better score over time. Plus, the longer you keep a credit card open, the longer your credit history will be, which can also improve your score.
Credit Card Best Practices
Follow these tips to help ensure you always stay in control of your credit card, and not the other way around.
- Treat it like a debit card. In other words, try not to spend more on your credit card than you can afford to pay off each month.
- Set a monthly budget. Many banking apps allow you to set transaction alerts to let you know when you’re getting close to a limit you’ve set.
- Make payments early or set up autopay. Missing your due date can really hurt your credit score – and may subject you to late fees and more interest to pay off. Making at least the minimum payment ahead of time, whether manually or by scheduled autopay, will ensure your score and your finances are protected.
- Make payment plans as needed. Sometimes an emergency or exciting opportunity pops up, and it’s easiest to put the cost on your card, even if it’s outside your monthly budget. We’ve all been there. In those cases where you can’t pay your credit card off in full by the due date, make a payment plan right away to ensure your debt remains manageable.
- Monitor your transactions regularly. Not only will monitoring your transactions through online banking help you track your habits, it will also help you spot suspicious charges much quicker. The faster you spot a fraudulent charge, the easier it is to reverse that charge and protect your finances.
- Know what’s in your credit report. You are entitled to regular, free copies of your credit report from each of the three nationwide consumer credit reporting companies – Equifax, Experian and TransUnion. Request your free credit report at the official AnnualCreditReport.com website.
By following the simple steps listed above, your credit card can become a powerful tool in your financial arsenal, helping you both improve your credit history and enjoy a more secure and convenient spending experience.
Which Credit Cards to Use to Build Credit
In theory, any credit card can be used to help improve your credit score, but some are better than others. For example, credit union credit cards often carry much lower rates than the cards from big banks – and a lower rate means less interest is accrued if you carry a balance from month to month.
Which credit card you choose depends on your goals and current situation.
“I’m a student and have little to know credit history.”
If you’re an older teen or a younger adult, a low-interest credit union credit card like the Buckeye Youth Empowerment Mastercard is a great option. These cards are designed for those who don’t have a lot of experience with handling their own credit card. A first-time credit card can be a much more accessible
choice if you are worried about qualifying for other cards, or just want more guardrails in place for yourself.
“I need help building or rebuilding my credit history.”
A secured credit card like the Buckeye Empowerment Mastercard can help you take control of your credit. Most credit cards are unsecured loans, which means they do not require collateral. A secured credit card is a special type of credit card that requires you to already have the cash on hand in a deposit account. In other words, the cash in your account is the collateral for your card.
Since your own money is used as collateral for the secured credit card, you will never be able to spend more than you can afford. However, since you’re still technically borrowing money through the line of credit, the payments you make are still included in your credit history and can affect your credit score. As such, using a secured credit card can reinforce good credit card habits and may strengthen your credit history.
“I’m already comfortable using credit cards and want more out of my card.”
Opening a credit card with a credit union can often get you a lower rate, no annual fees and a number of other perks. If you live or work in northeast Ohio, our Buckeye Bonus Mastercard will reward your good habits with 1% cash back on all qualified purchases, with no limits on the amount of cash rewards you can earn and no annual fee.
How To Apply for a Credit Card
If you’re ready to apply for your new credit card, we’re ready for you. Our Mastercards are available to those who live or work in Akron, Canton, Alliance, Cleveland and Hartville, Ohio. You can start your application online in minutes through our website, or you can call or visit any of our branches.