If you’ve ever struggled with a low credit score or faced challenges getting approved for loans, you know how crucial it is to build good credit. Using a credit card responsibly can be a powerful tool for building credit. By making strategic purchases and paying off your balance on time, you can enhance your credit score and unlock various financial benefits.
If you’re wondering what to buy with a credit card to build credit, here are some of the top minor and major purchases to consider.
Before we delve deeper, let’s first break down how using a credit card for these purchases can help you improve your credit.
How Buying with a Credit Card Helps Build Credit
Two key factors that shape your credit score are your credit utilization rate and payment history. The credit utilization rate shows how much of your available credit you are using, while payment history indicates whether you pay your bills on time.
Thus, using your credit card to make purchases can help improve your credit utilization rate. Just keep your spending below 30% of your total credit limit. Higher than that can be a red flag to creditors. Additionally, buying with your credit card and paying it off each month helps build a strong payment history. Always make at least the minimum payment by the due date, but if possible, pay off the entire balance each month.
3 Minor Purchases to Build Credit
Building credit doesn’t always require large expenses. In fact, small, everyday purchases can effectively boost your credit score when managed responsibly. Here are three minor purchases that can help increase your credit score while keeping your budget in check.
1. Groceries
Groceries are a staple in everyone’s budget, making them an excellent option for credit card purchases when you’re looking to build your credit. Additionally, many credit cards offer higher cash-back percentages on purchases in U.S. supermarkets like Whole Foods, Stop and Shop, and Foodtown. These include the following:
- American Express Blue Cash Everyday® Card: 3% Cash back at U.S. supermarkets.
- American Express Blue Cash Preferred Card: 6% Cash back at U.S. supermarkets.
- American Express Platinum Card®: Up to $12.95 credit each month after you pay for a monthly Walmart+ membership.
- Bank of America® Customized Cash Rewards Credit Card: 2% Cash back at grocery stores.
- Capital One SavorOne Cash Rewards Credit Card: 3% Cash back at grocery stores (excluding superstores like Walmart and Target).
By using your credit card when shopping for your groceries, you not only build credit but also earn rewards with this essential expense. Just remember to pay off your balance in full each month to avoid interest charges and keep your credit utilization low.
2. Utilities
Using a credit card for utility payments is another smart way to build credit. Many credit cards offer rewards for payments, meaning you can earn points, miles, or cash back on essential expenses like this one. This can also help you consolidate multiple bills into one payment, making it easier to track your finances. However, check if your utility provider charges a convenience fee for credit card payments and weigh the benefits accordingly.
3. Streaming Subscriptions
Streaming subscriptions like Netflix, Hulu, or Disney+ are perfect for credit card payments. These low-cost, recurring expenses are easy to manage and can help establish a positive payment history. Setting up autopay for these subscriptions ensures that payments are made on time, contributing to a solid credit history. Plus, since you would use these services regularly, you’re likely to keep the payments consistent, which is great for credit building.
Here are some of the best credit cards to build credit by paying for streaming subscriptions, as they offer cash-back rewards:
- American Express Blue Cash Preferred Card: 6% Cash back for select U.S. streaming subscriptions.
- American Express Platinum Card®: Up to $240 a year for digital entertainment purchases.
- Capital One SavorOne Cash Rewards Credit Card: 3% Cash back on popular streaming services.
- Citi Custom Cash® Card: 5% Cash back on select streaming services.
- S. Bank Cash+® Visa Signature® Card: 5% Cash back on your chosen category, including streaming services.
To stay on top of recurring expenses like streaming subscriptions and avoid late fees, try Cushion. This app consolidates all your accounts into a single dashboard, making it easy to see which bills have been paid and what’s coming up. By setting up autopay through your virtual Cushion card for these frequent billers, you can effortlessly build a positive credit history with every on-time payment.
3 Major Purchases to Build Credit
Apart from the daily small purchases, big-ticket items can significantly impact your credit score when purchased strategically. Here are three major purchases you should use your credit card for to build credit while earning potential rewards and benefits.
1. Appliances and Electronics
When considering what to buy to build credit, investing in appliances and electronics can be a great option. Air conditioners, refrigerators, and washing machines often come with higher price tags. Paying off these big-ticket items promptly can significantly boost your credit score and demonstrate your ability to manage larger amounts of credit.
Additionally, many credit cards offer price protection and extended warranties on such purchases, providing added value and security. These include:
- American Express Platinum Card®: Up to $10,000 in purchase protection for every item covered and extended warranty coverage.
- Bank of America® Customized Cash Rewards Credit Card: 3% Cash back for chosen home improvement and furnishing retailers like Home Depot and Williams-Sonoma.
- S. Bank Cash+® Visa Signature® Card: 5% Cash back on select furniture and electronic stores.
- S. Bank Shopper Cash Rewards™ Visa Signature® Card: 6% Cash back for selected retailers, including Home Depot, Ikea, and Ace Hardware.
2. Jewelry
Buying jewelry on credit can also be beneficial for building credit. Fine jewelry often represents a substantial purchase, allowing you to show that you can handle significant credit responsibly. Many jewelry stores offer installment payment plans or special promotions for credit card purchases.
Some famous jewelry stores that accept major credit cards include:
3. Travel
One of the best ways to build credit with a credit card is to use it for travel expenses such as flights, hotels, and car rentals. Additionally, using a credit card for travel expenses can provide extra benefits like travel insurance, cancellation coverage, and waived foreign transaction fees.
Pro Tip: Always make sure to pay off your travel expenses promptly to avoid accruing interest and to maximize the benefits.
Many credit cards offer rewards points or cash back on travel purchases, which you can use for future trips. Some of these benefits include:
- American Express Blue Cash Preferred Card: 3% Cash back on transit services, including taxis, trains, tolls, and buses.
- Capital One SavorOne Cash Rewards Credit Card: 5% Cash back on hotels and rental cars.
- Citi Custom Cash Card: 4% Cash back on hotels and car rentals.
4 General Tips for Building Credit with a Credit Card
Building credit with a credit card requires careful planning and discipline. Here are four general tips to help you maximize your credit-building efforts.
- Use credit card rewards wisely: Take advantage of credit card rewards programs, but avoid overspending just to earn points. Choose rewards that align with your spending habits and financial goals to get the most value.
- Keep your credit utilization low: Try to keep your credit card balance below 30% of your credit limit. This demonstrates responsible credit use and can positively impact your credit score.
- Monitor your credit regularly: Check your credit report regularly to stay informed about your credit status and identify errors or fraudulent activity. Correcting inaccuracies promptly can help maintain a healthy credit score.
- Make timely payments: Ensure you pay at least the minimum amount due by the statement due date to build a positive payment history. If possible, pay off your entire balance each month to avoid interest charges.
Another effortless and smart way to build your credit is to use Cushion. By utilizing the virtual Cushion card for your bills and Buy Now Pay Later (BNPL) payments, you can ensure every payment contributes to your credit score improvement. Cushion automatically tracks and reports your payments to credit bureaus, making it easier to maintain a positive credit history.
Summary
When managed responsibly, using a credit card for big or small purchases like groceries, appliances, and travel expenses can be a smart way to build credit. By knowing what to buy with a credit card to build credit, keeping your credit utilization low, and paying on time, you can work towards improving your credit score and unlocking financial benefits. Remember to choose a credit card with rewards to maximize the benefits while staying within your budget.
