How to Use a Reward Credit Card for Building Credit

There’s no doubt that signing up for a rewards card can be tempting. The offers run the gamut from cash back, to airline miles that can propel you from economy to business class, to points granted for purchases on everything from gas and groceries to travel and dining out.

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While it may be tempting to justify putting more purchases than are necessary on your card for the rewards they earn, it’s important to remember that your credit score is built on your ability to manage your debt and make payments responsibly ÔÇö in short, by living within your means.

Before you decide to use a reward credit card for building credit, here are a few things to keep in mind:

Avoid Carrying a Balance

If your balance carries over from month to month, you may, depending on your card and its annual percentage rate (APR), end up paying enough interest to make your rewards moot.

Late fees could also follow if you miss a payment, further driving down the value of your rewards. If you aren’t responsibly paying your bill on time each month, you may also negate some of the value of the rewards.

Stick to Essential Purchases

Once you’ve signed up for a rewards-based card, be disciplined.

Avoid making large purchases you can’t reasonably pay off, since you may end up wiping out any rewards earned on that spending by paying out more than you had bargained for in interest charges on purchases.

Some essential purchases that can help you accrue rewards include gas and groceries. But, in general, consider sticking to a budget and ensuring you’re comfortable with repaying the full statement balance on time each month.

Find a Secured Card That Offers Rewards

If you are not able to obtain an unsecured credit card, one great way to use a reward credit card for building credit is to apply for a secured credit card. When you apply for one of these cards, you’ll make a deposit to your lender that will then act as your credit limit up to the amount they can approve. If you deposit $300, your credit limit will be $300. If you deposit $1,200, you can spend up to $1,200.

These cards are real credit cards that report activity to the major national credit bureaus, and some also offer rewards. The Discover it® Secured Credit Card*, for example, rewards cardmembers with 2% cash back at restaurants and gas stations on up to $1,000 in combined purchases each quarter. Plus 1% cash back on all other purchases.

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*Discover reports your credit history to the three major credit bureaus so it can help build your credit if used responsible. Late payments, delinquencies or other derogatory activity with your credit card accounts and loans may adversely impact your ability to build credit.

Legal Disclaimer: This site is for educational purposes and is not a substitute for professional advice. The material on this site is not intended to provide legal, investment, or financial advice and does not indicate the availability of any Discover product or service. It does not guarantee that Discover offers or endorses a product or service. For specific advice about your unique circumstances, you may wish to consult a qualified professional.

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