Building your credit is one of the great side-quests of adulthood. Indeed without a strong credit score, things like mortgages, car loans, and even some jobs may be woefully out of reach. In this regard, getting and using a credit card should be a priority for just about everyone with a desire to build good credit.
Spending and paying off your credit card, on time, every month, is a surefire way to start building your credit. And even aside from the credit building, in 2023, even starter cards offer a host of generous offers that let your money work for you, even when you’re spending it.
Of course, all of this is easier said than done. There are tons of credit card options each with dozens of unique features and conditions. Navigating the virtual minefield of cards can be both discouraging and intimidating, but fear not! Here at InvestorPlace we’ve swept the credit card industry up and down and come up with options for just about anyone. If you’re new to the credit card game and looking to build your credit, earn some cash back, or enjoy some exclusive rewards, we know exactly which cards are worth checking out.
Best Credit Cards for People With No Credit
When you have no credit history, your options are limited. The fact is, many of the best high-limit, low-interest, cash-back, or travel cards, require credit scores between 670-850. If you’re just venturing out into the land of debt, you’ll want to look at low-limit, secured, credit-building cards. These credit cards won’t necessarily offer the best cash-back deals, or tons of travel points, but will help you build your credit from zero with some freebies likely thrown in.
This of course begs the question, what exactly are credit-building cards?
Well, as the name suggests, credit-building cards are credit cards meant to help their owners build and maintain their credit scores. These cards tend to have low spending limits, high annual percentage rates (APRs) and may charge anywhere from $0-$200 to open the card and its line of credit.
Secured credit cards are a sub-category of credit-building cards that operate like traditional cards, but require a security deposit, that then acts as your credit limit.
When you’re just starting out, you should really just pick one card to apply for. When you apply for credit, a hard inquiry is created, which usually hurts your credit a small amount. Obviously, in the long run, the credit built from having the card will outweigh the inquiry, but applying to several cards all at once will take a toll on your credit.
In the same vein, you typically shouldn’t spend more than about 30% of your credit limit in any given month. Utilization is a big factor in your credit score, and keeping your utilization ratio low, is a great way to ensure prompt credit build-up.
So, with all that out of the way, what cards are the best for when you’re just getting started?
1. The Petal 2 “Cash Back, No Fees” Visa Credit Card
At the top of the list is the Petal 2 “Cash Back, No Fees” Visa Credit Card. As the name suggests, the card has virtually no fees of any kind, decent cash-back rewards, no credit history requirement, and limits as high as $10,000. Aside from its high APR, WebBank hits all the right notes with its card.
Most credit-building cards tend to offer very limited cash back, by merit of the fact that you can get the cards with low or limited credit. Petal is something of an exception to that rule, however. The Petal 2 offers 1% cash back on all eligible purchases right from the start. On top of that, however, after six months of timely payments the cash-back rate jumps to 1.25%, and after a year, climbs up to 1.5%. While it may be seen as inconvenient to have to wait 12 months to reap the full benefits of the card, the flexibility of the card’s eligibility more than makes up for its minor plights.
The Petal 2 application process is very streamlined. Rather than a formal credit card application, WebBank will review your bank account during the application process, analyzing your typical inflows and outflows, in order to come to a decision. This also means, if you don’t have any credit history, you’re in luck: WebBank doesn’t require any sort of credit score to receive a card. Though, if you do have a credit history, that will be considered in the application process. Be warned, however, if you fail to make payments on time, you could face an APR as high as 31%, far beyond more accredited cards.
2. Capital One Platinum Secured Credit Card
Next up is the Capital One Platinum Secured Credit Card. The Platinum Secured is strong for many of the same reasons as the Petal 2. The card boasts no annual fees including foreign fees, is available to even those with limited or nonexistent credit histories, and reported credit limits as high as $10,000. On top of that, you can get pre-qualified for the card without hurting your credit. The card also has a number of security features that ensure you’ll never have to worry about fraudulent charges.
While the card doesn’t offer any rewards, nor a sign-up bonus, if you’re on time with your payments, Capital One (NYSE:COF) will gradually raise your credit limit. Indeed, you’ll qualify for higher credit lines in as little as six months, one of the fastest credit increases for this card type. On top of that, Capital One reports your timely payments to all three credit bureaus every month, meaning you’ll build up better credit in no time at all.
Capital One also offers a host of credit-building tools, like the ability to check your credit score at any time using the CreditWise feature.
It’s worth pointing out that the card’s secured nature means you’ll need to pay a security deposit upon qualification. However, the deposit is often as small as $49 and, assuming you make your payments, will be returned within just a few months.
3. Capital One QuickSilver Secured Cash Rewards Credit Card
Last on our list is the Capital One QuickSilver Secured Cash Rewards card. The Quicksilver Secured is a sort of best-of-both-worlds starter card that offers some enticing rewards while building your credit from the ground up. Like the other cards on the list, the Quicksilver offers $0 Fraud Liability, higher credit lines after just six months, and is available to even those with non-existent credit.
On top of that, the card boasts unlimited 1.5% cash back on every purchase, unlimited 5% cash back on hotels and rental cars found on Capital One Travel, and even six months of complimentary Uber One membership statement credits.
While the card does require a refundable $200 security deposit for a $200 credit line, a higher charge than other cards of this kind, it’s a small price to pay for the kind of rewards offered.
Best Credit Card for Students: Discover It Student Chrome
As a bonus for our student crowd, the Discover It Student Chrome offers simplicity, and value in a sleek shiny package. Because the card is designed for students, the card has no recommended credit range, no annual fee, a relatively low APR between 17%-26.24%, and a very enticing intro offer.
Discover (NYSE:DFS) offers Unlimited Cash Back Match on every dollar you spend in your first year. Indeed depending on how much you spend you can turn $50 into $100, $100 into $200, or $1,000 into $2,000. It’s one of the most generous intro offers you can find for a starter card, reserved for students.
The card also offers 5% cash back at a number of popular everyday spots, like Amazon, grocery stores, restaurants and gas stations. The stipulation here is that the cashback only goes up to your quarterly maximum ($1,500). But, if you go past the maximum, the card still offers 1% unlimited cash back on everything else, automatically.
If you’re a student looking to build your credit while enjoying a host of freebies, Discover’s Student Chrome is a strong contender.
On the date of publication, Shrey Dua did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.