Best 4 Digital Banks With Credit Cards [Detailed Guide]

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A credit card is a payment card issued to users (cardholders) to enable the cardholder to pay a merchant for goods and services based on the cardholder’s pre-established spending limit. The issuer of the card charges interest on the outstanding balance if it is not paid in full at the end of each billing cycle or if any other fees (such as an annual fee) were not paid.

Credit cards are issued by banks or credit unions, and Visa and Mastercard are examples of payment networks that route your purchases to the bank that issued your card; these banks determine the interest rate you’ll pay based on the prime lending rate (the prime rate plus a given percentage).

Credit cards are easy to obtain as long as you meet the minimum requirements, but it’s important not to overspend just because you have access to a credit line. Remember: just because you have a credit card doesn’t mean you need to use it.

In many cases, people have a hard time saying no to their credit cards because they’re so easily obtainable and discreetly used that it’s easy to forget just how much money you’re spending each month. Just remember: all of those expenses add up quickly and could eventually lead to debt.

That lending rate is set by your credit card issuer and varies from one card to the next.

Why would you use a Credit Card?

There are two main uses for a debit or credit card: as a primary payment method and as an emergency backup. A credit card can provide convenience, making it easy to make purchases even when you don’t have enough cash on hand. However, you should avoid using a credit card unless it’s your last resort because the interest rates are usually much higher than debit cards. Interest adds up quickly and can lead to a mountain of debt if you’re not careful.

When would you use your Credit Card?

Credit cards are best used for purchases that you could also make with cash or a debit card because it’s easier to keep track of expenses. For example, if you’re planning to attend a music festival over the weekend and are considering making additional purchases on food, drinks, merch, etc., using your credit card might be your best bet.

However, purchasing something that you would normally pay for with a debit card or cash is not a smart idea if you can’t afford to make the minimum payment each month. The interest rates on credit cards are usually substantially higher than those of debit cards, and it’s easy to get trapped in a downward spiral where your debt increases even more because of high-interest fees.

Pros and Cons of Credit Card:

Pros of Credit Cards

  • Credit cards can be a great way to build credit.

When you successfully pay off your credit card bill every month, that shows lenders that you’re capable of responsibly managing credit. Just make sure not to carry a balance on your card from one month to the next because this will damage your ability to build good credit by forcing you into debt.

  • Credit cards are convenient.

They’re accepted almost anywhere, which makes it easy to buy goods and services online or in person. You don’t have to worry about trying to pay with cash on the spot if you’ve misplaced your debit card because both can be used at supermarkets, gas stations, department stores, restaurants, etc.

  • Take advantage of sign-up bonuses.

Credit card companies are willing to offer consumers financial incentives in the form of cashback, travel rewards, or points that can be redeemed for gift cards or other items. You could potentially reap some major benefits if you manage your credit cards strategically and take advantage of these bonuses when the time is right.

Cons of Credit Cards

  • It’s easier to build bad habits with a credit card.

For many people, it’s just too easy to swipe their credit card for that $4 cup of coffee or pair of shoes they don’t need and rack up hundreds of dollars in interest fees each year. The best way to avoid this is to make sure you can pay off your balance in full every month, which means avoiding carrying a balance from one month to the next.

  • It can be expensive when used regularly.

Credit cards are useful for making purchases on the spot, but using them regularly can get expensive if you don’t have the money to pay off your balance every month. If you’re not very financially responsible or are dealing with debt already, it might be a good idea to stick with debit cards or cash.

These types of cards are useful for making purchases on the spot because they’re accepted almost everywhere, but you’ll need to be fiscally responsible if you want to avoid racking up large amounts of debt within just a few months of getting the card. It’s also important to do your research and read all of the fine print before signing up for a card because some of these cards can come with high fees and interest rates that could cost you hundreds of dollars.

  • Consumers often carry a balance on their credit cards.

Consumers often carry a balance on their credit cards, which can lead to high-interest fees. This problem is compounded when consumers fail to pay off their balance in full each month.

If you’re planning on taking out a loan or line of credit in the next few years, choose your credit cards wisely while you still have time to improve your score by making timely payments. While most banks won’t deny approvals based solely on the number of hard inquiries they see on your report, multiple inquiries within a short time can be viewed negatively because it often indicates that you’re having trouble managing your finances.

The Four Digital Banks With Credit Cards

Chime

The Chime Credit Builder Visa Credit Card is a secured credit card that builds credit over time by providing users with a cashback bonus each month that’s credited to your account. You’ll also receive 1% cashback on all purchases that are made through the app, which is just another way for you to save money when it comes time to pay the bill.

The Chime Credit Builder Visa Credit Card is currently available to anyone with a US address, but it’s important to note that applicants are required to have a bank account linked to their social security number in order to receive the card.

Discover Bank Credit Card:

No Annual Fee; No Penalty Rate

The Discover it Secured Credit Card is one of the few secured credit cards that doesn’t charge an annual fee, which is great for people who are working to rebuild their credit without having to worry about another charge on their monthly budget. The best part of this card is that there’s no penalty APR if you’re late on a payment.

The Discover Bank MasterCard provides cardholders with a variable APR on purchases that range from 11.99% to 22.99%. If you’re looking for a credit card that will help build your credit without charging an annual fee or hurting your balance, the Discover it Secured Credit Card is definitely one of the best-secured credit cards on the market today.

When you first open up an account with the Discover it Secured Credit Card, you’ll need to make a refundable deposit, but your credit limit will be equal to whatever amount you put down as collateral. You can request to increase your credit limit at any time, but you’ll need to make another deposit if you want to increase the credit limit.

The Discover it Secured Credit Card can help you build your credit score without having to worry about annual fees, penalty APRs, or large security deposits.

SoFi Bank Credit Card:

No Minimum Credit Score Required

If you’d like to apply for a credit card that doesn’t require a minimum credit score, then take a look at the SoFi Money Credit Card. This card offers 0% APR on both purchases and balance transfers for 12 months, which means you have plenty of time to pay off your debt without having to worry about interest charges.

The SoFi Money Credit Card is currently only available to residents in California and Utah, but applicants with a credit score of at least 600 can qualify for an unsecured line of credit that provides 2% cashback on all purchases made through the app. This amount may not seem significant when you’re making small purchases like groceries and gas, but it could add up quickly if you’re paying for a big trip or vacation each year.

SoFi Money Credit Card applicants are accepted instantly if they meet the minimum credit score requirements and have an annual income that’s high enough to justify the line of credit. Approval is guaranteed within eight minutes or your money back, so you won’t have to wait for days or weeks to find out if you’re approved.

Capital One 360 bank Credit Card:

No Annual Fee

The Capital One 360 Money MasterCard is another secured credit card that’s backed by a high maximum credit limit. Even though your initial deposit will be used as collateral for this account, the bank doesn’t actually keep the funds or use them to pay off your debt if you default on your payments. This means that no one gets to use the money you’ve saved up except for you.

The Capital One 360 Money MasterCard provides cardholders with a 0% APR on some cards. This card is an affordable option for those who want to build credit and also it has great rewards and a cashback program.

No matter which of the four best credit cards is right for you, it’s important to note that applicants are required to have a bank account linked to their social security number in order to receive the card. If you don’t already have an account at one of these digital banks and you’d like to learn more about them, take a look at our guide to the best savings accounts you can find online.

The digital banks with credit cards are certainly great options for building your credit, but they should only be used if your monthly budget can sustain them. The reason why these cards are so good is because of the security deposits provided by each bank, which helps protect both you and your money in case you get hit with high APR charges or any other fees that cannot be waived.

These cards are best used for emergencies, but they can also be great tools for building credit if you’re able to responsibly pay off your debts each month. No matter how you choose to use the digital banks with credit cards, it’s important not to go overboard by charging too much to your card.

Building a strong credit score is easier said than done, but it is possible if you choose the right type of credit card and use it wisely over a few months or a year. Remember that even though these cards carry lower APRs, they can still carry high fees if you’re not paying off your balances each month. Use these best credit cards responsibly to avoid losing money and damaging your credit score in the process.

What to Consider Before Getting a Credit Card?

Before you get a credit card, there are some important things that you should consider. You need to know what kind of credit cards are available in the market, their benefits, and their features. Once you have an idea about them, it will be easier for you to make a choice.

Secured and unsecured are 2 types of credit cards.

The first thing that you need to do is settle on the type of credit card that you would want to apply for. There are mainly two types of cards- secured and unsecured. The first type is popularly known as the “starter” or “training wheel” credit card. These are the ones where the money saved up by you acts as your security deposit. It can range from $500 to $10,000. The advantage of using this type is that you will not be able to spend more than what you have saved up for thus keeping your finances in check and the downside is that the amount of credit available with such a card is also limited.

Unsecured cards, on the other hand, do not need any security deposit as such. You can get a pre-qualified credit card offer from our website which will help you save time and effort in looking through the available deals.

Know your APR.

You should also know what kind of APR is offered by your potential credit card companies. The three categories that banks normally follow while offering this feature are low, moderate, and high rates of interest. You should know which category your credit card company falls into before applying for it. You can also compare the prices online and opt for the one that suits you the best.

Fees and charges are important.

You should also know what kind of fees and charges are applied by your prospective bank on using their credit cards. The annual fee, membership charge, and processing fee must all be considered while looking out for the best deals.

Your Credit Score.

It is also important to check your credit score before applying for a credit card so that you get the best rates and deals. The payments made by you and bills paid on time will affect your credit score which can be either positive or negative. Negative scores may not let you get the right kind of offers from the banks while positive ones can help you in securing better deals.

Rewards and Cashback.

Another important consideration that you should make is the reward and cashback options provided by the credit card company. You can also compare credit cards online and opt for one that provides better rewards and incentives in terms of discounts and cashback. This way you will be able to save more money on your card and not just pay off what you spend.

Penalties for not paying bills on time.

Credit cards companies have a lot of penalties for those who do not pay their bills on time. Late payments will cost you a considerable amount of money and your credit score may also be affected by it. If you fail to make the minimum payment within 60 days, there is every possibility of the total balance being converted into a penalty of around 25%. It is better to settle your bills on time and only carry the amount that you can afford to pay within a month and not more than that.

Your spending habits will determine your choice of a card.

The last thing that you should be concerned about is the amount of money that you are likely to spend on your credit cards. If you do most of your shopping through one company, then it is better for you to apply for their respective card so that they can provide benefits and special rates with higher spending limits. You should also be aware of the monthly payments required by different companies than go for the one that you think is manageable.

Credit Limit.

You want to make sure that the amount of credit that you are getting is high enough for you. If not, then it would be better if you settle for a lower limit and spend more within your means rather than borrowing money more than what you can afford. Every individual has different needs when it comes to monthly expenditures and thus there cannot be any universal limit that you can apply to yourself. You should decide this in consultation with your bank and keep spending within the limits of the credit provided by them.

Avail of special deals and discounts.

You can also avail of various deals and discounts on using their respective cards when buying from different companies. There are some websites that offer such deals when you shop online from a particular store using your credit card.

The Bottom Line:

But it may be a good idea to switch from your current card to this one if you often find yourself paying fees on purchases.

In conclusion, it’s much better for your credit score and your wallet, in the long run, to use debit or cash when you’re purchasing something that you could normally pay for with either of those methods. Of course, there are some instances when using a credit card is the best option, especially if you’re trying to accumulate reward points.

If you do opt for a credit card, make sure it has low fees and doesn’t charge an annual fee because these will likely outweigh any rewards that come with your purchase.

Be wary of constantly transferring money onto your credit card instead of paying it off because this will increase your credit utilization ratio, which can negatively impact your credit score. If you’re trying to build good credit by using a card, don’t rely on it for daily expenses and pay off the balance in full each month to avoid accumulating debt.

I lead product content strategy for SaltMoney. Additionally, I’m helping our broader team of 4 evolve into a mature content strategy practice with the right documentation and processes to deliver quality work. Prior to Instacart, I was a content strategy lead at Uber Eats and Facebook. Before that, I was a content strategist at SapientNitro, helping major Fortune 500 brands create better, more useful digital content.

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