Building Credit? Here's How to Choose the Right Credit Card
Get your credit report
Before you even think about getting a credit card, make sure you get your free annual credit report so you know exactly what your credit score is. That magic number will help you figure out which cards you can even apply for. And if it's a little lower than you hoped, you can use that information to get a card that will help you build credit instead of making the problem worse. Or, if you think your low score is a mistake, you can fix any errors on your report.
Learn about the different types of cards
- Balance transfer: If you have a bad history of carrying a balance on a couple of different credit cards, a balance transfer might be good for you. On these cards, you can consolidate your debt from multiple other cards. They typically give you a 0 percent introductory rate for about a year. That means you can focus on paying off the balance instead of worrying about the interest.
- Rewards/Cashback: This type of card gives you a small reward (usually worth about 1 percent of your total spending) on whatever you buy. The rewards can be redeemed as cash back or for things like electronics, clothes, and home goods. They sometimes offer opt-in rewards that rotate every quarter. They break your rewards into spending categories like gas and travel, but the catch is you have to sign up for them every month.
- Low interest: A low-interest card is just what you'd think. It gives you a lower interest rate than you'd typically find on credit cards. If you usually carry a balance month-to-month, having a lower interest rate will be a big help.
- Secured credit card/credit builder: Didn't like what you saw when you checked your credit report? A secured card requires an up-front cash deposit, but it's a great way to help rebuild your credit.
- Travel: If you love to travel, a travel reward card can get you airline miles, hotel discounts, or other travel perks. Make sure you check to see what airlines and hotels you're allowed to use your miles on--otherwise you might end up with a free trip on your least favorite airline.
Is it easy to get your rewards?
Do you need to give your mother's maiden name, blood type, and favorite color every time you want to redeem your rewards? That might discourage you from using them, and then what's the point? Look for a card that makes it easy for you to use your rewards (you earned them after all!). Some cards even sync with online retailers like Amazon, so you can just click a button and use your points to pay for your purchases instead of putting it on your credit card.
Use it wisely
With great power comes great responsibility. Remember, your card isn't going to help you build credit and buy a house unless you use it responsibly.