Question: What is the best credit card for me to start with? Are there credit cards that can prevent me from getting into financial hot water?
Answer: A secured credit card is probably the best choice for credit card rookies for a number of reasons. Is there a card that will prevent you from overspending? No such safeguards exist, unfortunately.
A secured credit card, however, could help you in quite a few ways. First of all, it allows you to become disciplined in utilizing a card, because it limits your maximum debt balance on that card to the amount you have set aside in the savings account securing the credit card. This amount is usually around $250 to $300, depending on the issuing bank's secured credit card deposit requirements. You can go to most larger banks in your community, and they will probably be able to set you up with such a program.
The greatest benefit to this type card, however, is that it is the fastest way to build up credit. Over 33 percent of your credit score is based upon on-time payment history. A secured credit card is reported to one or all three credit bureaus routinely, and all of your on-time payments are included in these reports. Late payments, by the way, are the fastest way to lower your credit score, so be sure you always make timely payments.
You can check with the institution to find out also, if after a period of time, they automatically convert your card to one that's unsecured as you develop a responsible attitude of on time payments. Other things to ask about before you select any card, would be whether there are annual fees for the card and what the interest rate is. Also, find out if your savings account will draw interest while it's securing your card. The answers to all of these questions are very helpful when deciding which secured credit card program is best for you. Good luck!