Although I am not an expert, many friends ask me about credit cards. They ask me what type of credit card they should get and how can they boost their credit scores.

So what kind of credit card should you get?

If you are going to use the credit card to accrue debt then always get the credit card with the lowest annual percentage rate (APR) and is generous in terms of late/ missed payment. Once in a while, you will find some very generous offers with 0% for over a year. Get this card and make a payment plan so you will not be overburdened by the interest payment.

Now if you want a check card, meaning you don’t intend to accrue debt and just use credit card for convenience and accrue rewards then get the highest cash back. There are certain mileage cards that are extremely generous. However, most of us do not travel as much as so cash back is the best deal because cash can be used anywhere. My favorite cash back cards Citi’s Double Cash  and Discover Card. After you become rich, you can get the American Express Centurion card and enjoy the perks.

Now how do do we boost credit scores? No one knows exactly how FICO is calculated but if you pay back on time for a long time, your credit card score rises. And the more places that report your credit, the faster your credit score increases.

So the trick is to get 3-4 credit cards within a year, preferably opening one credit card every quarter. Making too many credit cards at once raises a red flag (may be the person is in a liquidity crunch) and may hurt your credit score.

Use two credit cards as your main cards to purchase and keep the other two credit cards at home for emergency. For the two emergency cards, use them to pay either utility bills or recurring bills to show that the cards are being used. With four cards reporting your credit worthiness, your credit score should rise with time.

PS

Finally, don’t get into debt. And if you are in debt, try to pay it off as much as you can. Compounding interest can be a killer.