Transcription
What's up guys? It is Ryan and I wanted to talk today real quickly about secured credit cards.
I had a 21-year-old girl yesterday that she signed up. I'm teaching her about how the credit system works and she had to get started with a secured credit card. She had zero credit, no history, nothing, no payments, no credit cards, nothing. So I said, let's start with a secured credit card. She went to her local bank, which was Navy Federal, and she went and applied there for a secured credit card.
Now, this is what you need to know before you go and do that. Number one, you want to make sure that it's a secured credit card that after a duration of time, you're going to get your money back. It's typically going to be six months of use and spend. They want to make sure that you pay on time and then whatever that amount of money is, they will give it back to you and graduate you to a regular credit card, not a secured card.
That leads to the second thing. When you're getting a secured credit card, you never want to put more than a $500 limit. Now, there's a couple reasons for that. Number one, you don't want to have to put out that much money. She was going to put $2,500 because she thought the increased credit limit would help. You don't have to do that. If you have a $500 limit, two things happen.
Number one, you have a lower limit, so you have to make sure you're paying that thing every single week or anytime you at least exceed 50% utilization. Now, you know when the reporting date, it has to be below 10%, but by having a lower limit, it makes you pay more attention to the bill, what you owe, and when it's actually due. So that's really, really good.
The second thing is with regards to the lower limit is that you don't have to worry if for some reason they hold this longer than six months, you don't have to worry about being out that $500. So yes, even if you have to start with $300, that is fine. At least get started because the sooner you start getting credit and establishing credit, the sooner you start making payment history, the sooner you're going to have a better, higher credit score.
The last thing you need to know is look for cards with cash back. There are some cards that will give you cash back. I believe the Discover Card does. I know the Quicksilver does from Capital One. It's just really important for you to understand that every dollar you spend should be giving you something in return. That is one of the most important things about credit is getting something in return, aside from having a high score, which gives you lower interest rates. You're always getting something in return, whether it's points, whether it's cash back. Use that to your advantage.
If you have any comments, any questions, put them below or let me know if there's any other topics that I can cover for you.