Credit cards are an important part of your finances, but not everyone can get one. You need to have good credit to get approved — but if you're young and just getting started, you may have no credit to report. Or maybe you've made a few mistakes and damaged your credit score.
Regardless of your situation, don't worry. There are credit cards designed to help you build credit, without digging you into credit card debt. These cards will report your payments to the credit bureaus, and the best ones have minimal fees and moderate interest rates. Plus, some provide educational resources to help you better understand your finances.
Erika's Picks for Best Credit-Building Cards
- Best for no security deposit: Chime Credit Builder Secured Visa® Credit Card
- Best for low security deposit: Capital One Platinum Secured Credit Card
- Best for earning rewards: Capital One Quicksilver Secured Cash Rewards Credit Card
- Best for welcome bonus: Discover it® Secured Credit Card
- Best for no credit check: OpenSky® Plus Secured Visa® Credit Card
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Best for No Security Deposit: Chime Credit Builder Secured Visa® Credit Card
- Rewards rate: None
- Welcome offer: None
- Annual fee: $0
- Minimum security deposit:$0
. . .
Most credit-building credit cards are secured. But the problem with most secured credit cards is that they require an upfront cash deposit to open the account.
The Chime Credit Builder card works a bit differently. Instead of a cash deposit, the card is linked to a Chime spending account. You’ll only be able to spend as much on your card as you deposit in your account — preventing you from going into debt.
(However, you will need to have at least one direct deposit of $200 into your account before you can be approved for the Chime Credit Builder card.)
There are no fees with this card and you won’t be charged any interest. To increase your spending limit, simply add more money to your account.
While this card is a good option to build credit there are some drawbacks. You’ll need to have a Chime account with direct deposit, and depending on your situation, you may not be able to keep a large deposit in your account — which means you won't have a large spending limit.
The Chime Credit Builder card doesn’t offer any perks or rewards other than no annual fee and no foreign transaction fees. While it’s a good card for rebuilding credit, it is fairly bare-bones. You’ll miss out on chances to earn cashback on your spending, which you can get with some other entry-level credit cards.
Best for Low Security Deposit: Capital One Platinum Secured Credit Card
- Welcome offer: None
- Rewards rate: None
- Annual fee: $0
- Minimum security deposit: $49
. . .
The Capital One Platinum Secured Credit Card is another great card to rebuild credit — and it can help you graduate to an unsecured card. After making consistent on-time payments, Capital One will review your account for a higher credit limit.
To open an account you’ll need to put down a $49, $99, or $200 refundable deposit. Any of these amounts will get you a starting credit line of $200. You can also raise your initial credit line by depositing up to a maximum limit of $1,000.
If you’re a responsible credit card user, Capital One will review your progress and consider an increase to your credit line within as little as six months, and eventually transition you to an unsecured credit card.
There are no fees to maintain this account, including no foreign transaction fees. You’ll also get access to some of Capital One’s other features, like $0 fraud liability and credit monitoring through CreditWise.
But unlike most other Capital One cards, the Platinum Secured card doesn’t offer rewards.
Learn more about the Capital One Platinum Secured Credit Card.
Best for Earning Rewards: Capital One Quicksilver Secured Cash Rewards Credit Card
- Rewards rate: 1.5% cashback on every purchase
- Welcome offer: None
- Annual fee: $0
- Minimum security deposit: $200
. . .
If you’re looking to earn rewards while rebuilding your credit, the Capital One Quicksilver Secured Cash Rewards Credit Card might be for you. It has a flat reward rate that lets you earn cashback for routine purchases like gas and groceries. Plus, there's no annual fee.
You'll get 1.5% cashback on all purchases, which you can redeem for cash or apply directly to your statement to cover your purchases.
There is a $200 minimum security deposit, which will give you a credit limit of $200. However, the more you deposit, the higher your credit limit will be. After six months, you'll also be automatically considered for a higher credit limit.
You'll get access to CreditWise from Capital One. With this, you'll have access to your credit score at any time. You'll also get alerts when there are changes to your TransUnion or Experian credit reports. This will help you to monitor your information and keep a close eye on your credit.
Learn more about the Capital One Quicksilver Secured Cash Rewards Credit Card.
Best for Welcome Bonus: Discover it® Secured Credit Card
- Rewards rate: 2% cashback at gas stations and restaurants (on up to $1,000 in combined purchases each quarter, then 1%); 1% on all other purchases
- Welcome offer: Discover will match all cashback earned at the end of your first year
- Annual fee: $0
- Minimum security deposit: $200
. . .
Discover offers one of the best rewards programs for entry-level credit cards, including with its secured credit card. Even if you don’t have a credit history, you can still earn cashback on purchases and qualify for Discover’s first-year cashback match bonus.
You'll earn 2%cashback at gas stations and restaurants (up to $1,000 in combined purchases) eachquarter.Plus unlimited 1% cashback on everything else.
To apply for this card you’ll need to put down a minimum $200 refundable security deposit (maximum $2,500).
Discover gives you a pathway to graduate to an unsecured credit card. After seven months, Discover will review your progress. If you qualify, they’ll upgrade you to an unsecured credit card.
Best for No Credit Check: OpenSky® Plus Secured Visa® Credit Card
- Rewards rate: None
- Welcome offer: None
- Annual fee: $0
- Minimum security deposit: $300
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If you’re worried you won’t be approved for a card, OpenSky might be the solution for you. OpenSky doesn't do a hard pull on your credit when you apply, and says they have an 88% approval rating.
To open up a credit line, you'll need to transfer anywhere from $300 to $3,000 to your OpenSky Secured Visa card. You can then use the card to pay for regular expenses and your on-time payments will be reported to the credit bureaus.
Every six months, you’ll be eligible for a review to increase your credit line. And if you make consistent payments for six months, you’ll be eligible for an unsecured credit card. Just like the secured card, this doesn’t ding your credit score. OpenSky uses your existing history as a customer to determine whether or not to issue you an unsecured credit card.
The OpenSky Plus card does not charge an annual fee. It also comes with an interest rate lower than most secured credit cards on the market. Still, it’s important to be mindful of the charges you make on the card to avoid carrying a balance.
How to Choose the Right Credit-Builder Card
There isn’t a single right credit card to choose when you need to build credit. Your options for credit cards will depend on your personal situation.
For example, if you don't have a credit history yet, a student card might be a good option for you. But if you’ve filed for bankruptcy or have a low credit score, a secured credit card might be your best bet.
Here are some factors to consider:
Eligibility criteria
Some cards may have a credit score minimum, while others won't do a hard check on your credit and may base your eligibility on your employment history or the balance in your bank account.
Ensure that it's a card you can realistically be approved for before you apply. Otherwise, you'll be wasting your time and possibly causing an unnecessary pull on your credit history.
READ MORE: What Is a Good Credit Score?
Interest rate
Credit cards often charge very high interest rates, or annual percentage rates (APR). If you're not careful and don't pay off your balance every month, you could risk racking up credit card debt. This can get expensive fast and further harm your score.
Thankfully, some credit-builder cards don't charge interest, but others do. Check what the rate is and spend responsibly.
Minimum deposit amount
Putting a deposit down to open a credit card might not sound ideal, but it can help you establish good habits. Secured credit cards limit how much you can spend, preventing you from spending beyond your means.
If you're going with a secured card, keep in mind that some cards offer lower deposit minimums.Choose a card that you can comfortably make a deposit on without having to dip into any savings.
Pathway to an unsecured card
Check if the card has a pathway to getting an unsecured credit card after you've proven responsible use. Some card issuers may automatically offer to upgrade you after several months if you've consistently made your payments on time.
Rewards
See if there are any rewards associated with the card. While most credit-building cards offer the bare minimum, some cards, like the Capital One Quicksilver Secured and the Discover it Secured, offer rewards.
However, while rewards are a nice incentive, if they tempt you to overspend, a rewards-earning card might not be the right credit card for you.
Your goals
Last but not least, make sure whatever card you choose aligns with your goals. Whether you’re trying to establish credit for the first time or rebuilding your credit after years of neglect, you want to find a card that’s going to work with your spending habits.
READ MORE: How to Get a Credit Card
Pros and Cons of Credit-Builder Credit Cards
Credit is a bit of a Catch-22: you need to have credit to get credit, but it’s hard to build credit without already having credit.
A credit-builder card is a way to get around this. You can use it to build your credit and can even get one with limited or bad credit. But there are some potential downsides to consider.
Pros
- Establish good habits: A lot of credit-building cards come with opportunities to increase your credit line or graduate to an unsecured credit card.
- Avoid overspending: Unlike traditional credit cards, secured cards are backed by a cash deposit. This makes it difficult for you to spend beyond your means.
- No credit checks: Many secured cards don’t do a hard check on your credit report, so you don't need to worry that you won’t get approved because of a low credit score.
Cons
- Credit limit restrictions: If you don’t have a lot of money to put down for a deposit, you won’t have a lot of money to spend on your card.
- High interest rates: Credit-builder cards are designed for people who might not qualify for a traditional credit card. Because this involves higher risk for the issuer, you’re probably going to wind up with a high APR.
- High credit utilization: The amount of credit you use compared to the amount of credit you have is called your credit utilization ratio, and it impacts your credit score. With a low credit limit, you could increase your credit utilization, negatively impacting your score.
READ MORE: How to Increase Your Credit Score the Right Way
FAQs
Do all credit-building cards require a security deposit?
Most credit cards aimed at building credit are secured credit cards — meaning they do require a security deposit. But not all of them are. Chime, for example, links a deposit account to its Credit Builder Visa Credit Card. You just have to keep replenishing the funds available in the account to be able to use the card.
Can you get a credit card with no income?
It’s possible but it might be difficult. If you don’t have income to report, it signals to the credit card issuer that you won’t be able to pay your balance. You may be required to submit extra verification that you’ll be able to reliably make payments before getting approved.
How do credit cards help you build credit?
Credit cards demonstrate your ability to repay borrowed money. When you make consistent, on-time payments, you’re telling lenders that you are a responsible borrower. Keeping your balance low can also help as this demonstrates a low credit utilization ratio. This tells lenders you know how to manage your money.
Final Thoughts
Credit cards often get a bad rap for being a path to debt. And while that is true if you're irresponsible with them, they're also a necessary part of building your credit history — a history that you need to qualify for loans or a mortgage later on.
Credit-builder credit cards are a safer alternative to traditional credit cards since they have a low limit or a limit set by your own deposit. After a few months of responsible usage, you should see your credit score start to increase and may even be upgraded to an unsecured credit card.
Disclosure: Opinions expressed here are the author's alone, not those of any bank, credit card issuer, hotel, airline, or other entity. This content has not been reviewed, approved or otherwise endorsed by any of the entities included within the post.
