Should I get a credit card?
Having the use of a credit card can be very handy in many ways. However, for all their good points, there are equally things that you must be careful of when you are thinking of applying for a credit card. They are, as the old saying goes, “a double-edged sword”.
Firstly, think carefully about why you want a credit card. Is it as an emergency back-up if you have a sudden expense that you can’t cover any other way? Is it to repay debts you’ve accumulated? Or do you intend to use it to spread the cost of a big purchase in the near future? All of these are valid reasons and knowing its intended purpose will help you choose the credit card that is right for you.
What credit card should I get?
That said, you’ll want to spend the time seeking the best credit cards for your needs, which will usually come down to the interest rates and fees that are charged and the associated terms and conditions. Typically speaking, the lower the interest rate, the more cost-effective the card will be, so make sure to spend the time thoroughly comparing the options, using our dedicated charts to help.
How do you get approved for your first credit card?
If you’ve never had a credit card before, it can sometimes be difficult to be approved, for the simple reason that you won’t have an extensive credit history. You can lay the foundations beforehand by making sure you’re registered on the electoral roll, paying bills on time, effectively managing a current account or mobile phone contract and ensuring you have a regular income, though be prepared for the fact that you may only be approved for a credit builder card in the first instance.
These cards usually come with higher interest rates and lower credit limits than their more mainstream alternatives, but they can be the perfect stepping stone for a different card later down the line. Provided you show that you’re a responsible borrower – which means paying at least the minimum payment each month, but ideally the full balance, if only to avoid excessive interest charges – you can build a positive credit history, and it may only take a few months to be approved for a different kind of card.
What is a credit card limit?
The credit limit – or the maximum amount a provider agrees to lend you – will vary depending on your individual circumstances. Your credit score will again be the key determiner of this, though things like your income, outstanding debts and the amount of credit you’ve already got available to you will also come into it.
What is a good credit limit for a first credit card?
For new borrowers with no credit history, the credit limit is likely to be a lot lower than someone with a decent credit score. In some cases credit limits can be set as low as £50, and they’ll rarely be higher than £1,500 for a first or credit builder card.
That said, the limit can quickly increase once you show you’re a responsible borrower – the average credit limit is between £3,000 and £4,000, and it isn’t uncommon for those with high incomes and good credit scores to have limits of £10,000 or more. Though it’s best not to request a higher limit yourself if you’ve only had the card for a few months, as doing so could indicate financial difficulty and, if the lender declines, it could impact your credit score. Instead, wait for the lender to offer it to you once you’ve proved your creditworthiness.
Can I spend my whole credit card limit?
You can, but it may not be wise. For starters, you’ll need to make sure that any interest charges that are applied as a result of your spending won’t push you over your credit limit – in which case you’ll face additional fees – and you may find it more difficult to bring it back down to manageable levels if you use too much of your balance.
Maxing out a credit card can also negatively impact your credit score, particularly if it’s your only card or you’ve maxed out others; it’s generally recommended to only use a maximum of 25-30% of the credit available to you (what’s known as your credit utilisation ratio) to show lenders that you’re not struggling financially. As such, if you spend all of your limit it’s an indicator that you’re facing financial difficulty, and your credit score could be impacted as a result.
What credit score is needed for a credit card?
This will typically depend on the lender and their requirements for your credit score and history. You can check your credit score for free in some cases. The higher your score, the better your chances of being approved, and the better the terms you’ll likely be offered. If your score is lower, you may still be able to apply for a bad credit or credit builder card.
What are the easiest credit cards to get approved for?
By far the easiest credit cards to get approved for are those designed for bad credit. These credit builder cards will still run a credit check, but lenders will typically accept a lower score than they would for more mainstream credit card deals. However, the interest rates will be far higher, so you’ll need to make sure you can manage them effectively to prevent your score from being hit even further.
If you’re worried about being approved, it’s worth heading straight for providers who offer credit builder cards, many of whom will have an online eligibility checker so you can see your chances of success before applying. These tools normally don’t show up on credit reports, so they won’t affect your score if you’re unsuccessful.
Which credit card is right for me?
To know which card will work best for you, you'll need to know what different types are available, and what they do:
If you want to consolidate existing credit card debt
0% balance transfer cards can be ideal for consolidating any existing credit card debts, as they give you a certain number of months (or even years) interest-free to pay off the balance you put on the card. Although they usually come with a balance transfer fee, it is likely to be cheaper than leaving your balance on a typical card paying your purchase rate (though note that there are interest-charging cards that may charge no fee, which could turn out to be more suitable for your needs). Similarly, you can also find cards that offer 0% money transfer deals, which can be used to transfer funds to your current account to pay off overdrafts as well.
If you want to make purchases
0% purchase cards allow you to make purchases for a certain number of months without paying interest. If you're looking to make a big purchase with a credit card at a low rate or want to take advantage of (online) purchase protection, these cards could be for you. As with balance transfer cards, it's recommended you pay off what you owe on these cards before the introductory period ends, so you can avoid paying interest altogether, and remember to pay at least the minimum amount each month otherwise the introductory offer might be withdrawn.
If you want to consolidate debt and make purchases
0% interest cards combine the above, giving a certain number of months interest-free on balance transfers, purchases and sometimes also money transfers, in case you've got both debt and more purchases you need to make. These cards will probably be less generous than the single-purpose cards, with shorter interest-free terms, so always compare to find the best credit card deals.
If you want to be rewarded for making purchases
Cashback credit cards give you a certain percentage of cashback every time you use the card to make a purchase, which means you could actually make money shopping if you manage to pay off the balance and avoid interest every month. In the same vein, reward cards allow you to get certain non-monetary rewards for using them.
If you're going abroad
Travel credit cards are designed to be specifically used abroad – unlike other credit cards, which tend to charge high fees for any use outside of the UK. So, if you're going away and would rather not rely on travel money or a prepaid travel card, or you would prefer to pay off the balance after the holiday rather than save up in advance, one of these cards may be for you.
If you need to repair your credit score
Credit repair cards, if used responsibly, allow you to repair a credit rating that has been damaged by debt accrued in the past, or can help you build a rating if you've never had credit before. Make sure you don't have any other credit cards or debts that could undo all the good work of using these cards, and remember to repay them every month, and you should be able to get your credit score back up to scratch over time.
Whatever you need, make sure you compare credit cards to find the best credit card deals. Also, check that you are eligible before you apply for credit, and that doesn’t just mean having a good credit rating. Are you old enough? Have you been a UK resident for long enough? Some lenders may insist you earn a certain amount per year, or that you already have an account with them, so check that it’s a good fit before you apply, otherwise you may jeopardise your credit score for no reason!
