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|APR||Minimum credit||Max credit|
aqua Purchase Credit Card
|34.9% APRRepresentative (variable)||£250||£1200||Apply|
aqua Start Credit Card
|49.9% APRRepresentative (variable)||£100||£300||Apply|
Origin Credit Card by Vanquis
|59.9% APRRepresentative (variable)||£150||£1000||Apply|
Black Diamond Credit Card
|59.9% APRRepresentative (variable)||£150||£1000||Apply|
NEO Credit Card
|39.9% APRRepresentative (variable)||£150||£1000||Apply|
Vanquis Bank Visa Credit Card
|39.9% APRRepresentative (variable)||£150||£1000||Apply|
Barclaycard Initial Credit Card
|34.9% APRRepresentative (variable)||£150||£1200||Apply|
Capital One Classic Credit Card
|34.9% APRRepresentative (variable)||£200||£1500||Apply|
Capital One Platinum Credit Card
|29.8% APRRepresentative (variable)||£200||£1500||Apply|
aqua Advance Credit Card
|34.9% APRRepresentative (variable)||£250||£1200||Apply|
Vanquis Bank Aquis Visa Credit Card
|29.8% APRRepresentative (variable)||£250||£1000||Apply|
marbles Classic 29.7% Credit Card
|29.7% APRRepresentative (variable)||£250||£1200||Apply|
aqua Classic Credit Card
|29.7% APRRepresentative (variable)||£250||£1200||Apply|
Chrome Credit Card 29.3% APR (variable)
|29.3% APRRepresentative (variable)||£250||£1000||Apply|
Chrome Credit Card 24.7% APR (variable)
|24.7% APRRepresentative (variable)||£250||£1000||Apply|
aqua Reward Credit Card with Cashback
|34.9% APRRepresentative (variable)||£250||£1200||Apply|
Capital One 0% Balance Transfer Credit Card
|34.9% APRRepresentative (variable)||£200||£1500||Apply|
Tesco Bank Clubcard Foundation Credit Card
|27.5% APRRepresentative (variable)||£250||-||Apply|
Purchase cards are a great option for any major expenditure you might have coming up, or also if you want to spread the costs of a lot of smaller purchases over a period. They involve low interest or interest-free periods (lasting in some cases up to 2 years), which allow you to pay off the debt without having to pay much interest as long as the amount is cleared before the period ends.
This can be a very cheap way to get credit for a large purchase like a kitchen renovation, car or expensive electronics. The amount debited to a 0% purchase credit card will not accrue interest at all in the interest-free period, so it’s like an interest-free short-term loan (allowing you to borrow money for no extra cost).
This makes purchase cards possibly the best method for financing large expenditures, especially with the payment protection offered by credit cards.
Under Section 75 of the Consumer Credit Act, if any purchase between £100 and up to a maximum of £60,260 is made in whole or in part with a credit card and the goods or services turned out to be unsatisfactory, undelivered, or not as advertised, the payment is protected by your card provider. This protection applies even if the seller has gone out of business or has ceased responding to enquiries.
But again, the amount needs to be paid back within the interest-free period or it could start to become a costly way to borrow.
Aside from the payment protection offered, there are other benefits to making large purchases with one of these cards. Like other credit cards, you can set up a monthly payment, making it very simple to manage the debt.
Other cards called cashback credit cards offer even more benefits if the also offer 0% on purchases. They function similarly to a purchase credit card with a 0% rate on purchases., but you can also claim rewards and more commonly get cashback on some purchases (terms apply). For instance, the Santander 123 card gives a 23 month interest free period on purchases, and you get 1-3% back on purchases made, depending on where the purchase was made.
Given the amount of benefits of these cards, there are usually quite strict requirements in terms of credit score needed for successful application. However, there are some credit builder cards with lower application requirements that also have 0% purchase periods, which can be an option if you’re interested in a purchase card but cannot get approved for some of the standard cards.
And of course, credit cards can be hard to manage, so you should also consider a standard loan which may not be as financially appealing but might be more straightforward in terms of repayments.
These options are particularly relevant given the standard rate of interest after the interest-free period ends. They can be quite high, so with a loan at least you have a better idea of what the interest rate will be fixed at for the duration of the repayment period.
Purchase cards are a great option if you have the credit score, know you can make the repayments and have some expenditure coming up. There are other options like credit builder purchase cards, that can also be an alternative. Better still in some cases is a card that allows cashback on purchases as well as an interest free period.
Make sure you can make the repayments and they offer a lot of benefits.
Money transfer credit cards explained:
These cards allow for a great deal of financial flexibility. Many credit cards are not an ideal solution for using to withdraw money or make transfers. The fees, charges and interest involved with cash transfers from these cards make them an inconvenient and risky option.
However, considering the many benefits that can be offered by a credit card, you may think of using one for things like paying for a big expenditure with cash, or transferring funds to your regular account to handle other debts.
So money transfer cards are a good way to make these transfers without some of the drawbacks associated with credit cards. They do have their share of things to be aware about though.
In most cases, you can use a money transfer card to make an interest-free transfer to your bank account, which must be then paid back within a certain period in order to avail of the interest-free rate. Furthermore, in most cases this initial transfer period only lasts for a certain time after getting the card (often lasting about 2 months), during which time you’ll have to make the transfer.
The payback period during which you can pay back this amount interest-free (which can be up to 2 years), so you need to clear the balance on the card within this period to avail of the interest-free offer. For some cards there might be an unlimited interest free period, however – but there will always be a period in which you have to pay back the amount.
As with balance transfer cards, you can’t take out 2 cards with the same provider, so if you have a credit card from Bank of Scotland you won’t be able to get a money transfer card from them too. Most providers of money transfer credit cards put fairly high requirements on who can avail of them – and a decent credit score is necessary.
There is a fee involved for most transfers – usually around 3-5% of the amount of the transaction, but many cards do not charge this fee (again, this only applies during the initial transfer period, as mentioned this is usually around 2 months).
And again, it’s quite important to be able to pay off the amount transferred out of the card during the interest free period, since after that the interest that kicks in could be higher than you might pay of a loan or other credit card, for example.
The first thing to note is that the terms of the different money transfer credit cards vary widely. If you think you won’t be able to pay back the amount transferred within the interest free period you should probably look for a card that has a longer or unlimited interest-free payback period.
A loan might be necessary if you need a larger amount over a longer period. Overdrafts are also worth looking into, since many overdrafts have the same interest-free benefits as a money-transfer card has.
If the transfer fee is an issue and you need the transfer to pay for a big purchase, then you could consider a 0% purchase card, which would not have as long an interest-free period as a money transfer credit card but would be cheaper if you are sure you can pay off the amount within the interest free period (since, of course, there is no fee – so you could save up to 5%).
As mentioned earlier, these cards are a good option if you have a large expenditure coming up. Aside from a 0% purchase card, they might be the best choice. Money transfer cards can also be used to pay down debt – as long as you can be sure you can make the repayment within the interest-free period then it could be a way to reduce the cost of your overall debt.
In the past few years the rate of credit card fraud has gone down significantly with providers leveraging new technology to add extra security measures. This means that it is now safer than ever to use a credit card. Unfortunately, however, thieves have kept up the pace, using their own fair share of technical breakthroughs to defraud credit card holders. So risks still remain, but if you take heed of the most common types of card fraud you can protect your finances and belongings.
It’s worth mentioning first what to do if you suspect someone is attempting to defraud you: call your card company immediately, and also give details of the incident to ActionFraud
This practice isn’t as effective for criminals as it once was, thanks to developments in physical card technology like EMV chips, but is still a concern. Cloning, also known as skimming, is a practice whereby a card is duplicated when it is scanned through a machine in a shop or at other points of sale (and even ATMs). The best way to prevent this from happening is to be alert to suspicious equipment or unusual behaviour of staff operating these machines, and check your statements regularly.
This is when businesses or their employees collude with criminals (or run the operation themselves) to defraud the provider or credit card user. Their is not a whole amount you can do to prevent this, other than taking the same precautions as with skimming and being alert to anything odd about a merchant, and also keeping in touch with your provider in case they want to verify transactions with you. While this is mainly a concern for the credit card company, it can also cost you money or at least cause a lot of hassle.
This one is quite straightforward. In the event of your card being lost and falling into the wrong hands or being stolen, a criminal can use it to make purchases. Thankfully, preventing this is also straightforward (and maybe easier said than done), in that if you keep your card safe you’ll be fine. If you suspect your card is lost or stolen, call your provider immediately, followed by calling the police in the event of suspected theft.
This involves a fraudster contacting you posing as your card provider and attempting to get you to disclose security details which can then be used to access your account or use your card. As you have probably heard before, never give out information such as your PIN by phone, mail or email to anyone contacting you unsolicitedly (and in the case of your PIN, to anyone for that matter).
Also, make sure that these details can’t be obtained or guessed by criminals. So using a family member’s birthday as your PIN, or binning any documents with sensitive information without shredding them is a bad idea.
This category of fraud is similar in nature to phishing. If a criminal has your details they can open accounts, apply for cards with their own address, or take out loans in your name. Any costs incurred you will be liable for and may have to pay. The same precautions should be taken as with regards to lost/stolen cards and phishing.
A tactic quite similar to these is known as “never received”. It involves a replacement card never reaching you as it has been intercepted by a criminal. A combination of these tactics is possible, wherein a fraudster uses phishing to obtain enough details from you to request a replacement card, with a view to intercepting the card in the post. Again, the simple steps outlined above can prevent a thief’s successful implementation of this practice.
To be extra careful (especially in the event that you suspect anything amiss has occurred), it is a great idea to periodically check your credit file to ensure no actions have been taken in your name.
There are further steps you can take to ensure the safety of your card and identity.
In terms of staying safe online, keep your device’s virus protection up to date to avoid spyware compromising your privacy. Keep vigilant when using shared or public networks, as criminals can in some cases monitor your activity online through WiFi. It’s often best to wait until you get home to process transactions online if possible.
Furthermore, email communication is a favourite means of fraudsters to obtain your data. Suspicious or unknown emails, senders or links within emails should be avoided – delete any emails of this nature. Your provider will have a standard email address so don’t be caught out by copycat sender addresses. Never disclose your PIN or other details via email.
It bears repeating that you should never disclose your PIN to anyone, or even write it down. If you do so and are defrauded you risk losing any legal protection you have and not being able to recoup the lost funds.
And as always, you should review your card statements for any unknown purchases, and contact your provider immediately if you see something amiss.
Fraud is a real threat, but if you check your providers communication standards, keep in contact with them and protect your online and offline documentation and activities you should be fraud-proof. Other measures like checking your credit file are great steps to ensuring your identity is protected.
Guide to credit scores:
Your credit history is the main determinant of your credit score or rating. This is the principal criteria upon which the decision regarding a credit card or loan application is based. Different credit scoring agencies have different scoring systems and the scores for an individual will vary, but are usually around the same.
This has a great affect on the application process. The company you apply with will make their own calculations with the score after they perform a credit check, and use this to determine if your application is successful. Not only does this affect your application, but even if your application is accepted you may not be eligible for the advertised interest rate for the card in question (which the card issuer only has to offer to 51% of customers by law).
It is useful for you to be aware of your score with the 3 main agencies (Experian, CallCredit, and Equifax). It only costs a small amount to check your score, which you are legally entitled to do. If you determine that some of the details in the credit file are inaccurate you can then request a modification with the agency in question. You should provide supporting evidence and explain why the details of the file are incorrect.
If you have recently been turned down for credit, it may be useful to ask the organisation that turned you down to explain why they did so. They are not legally obliged to, but any information they provide could be very indicative of what areas you should possibly focus on in order to make your profile more successful for applications in future.
Another obvious good practice is to make sure any outstanding debts you have are cleared, which can obviously be easier said than done. Overall good financial standing is the basis of a good credit score. It is also useful to close down any dormant accounts or accounts you do not use anymore. This is because the credit card company might be concerned if you have too much current lending facilities open to you which could result in large borrowing that you may not be able to pay back. So tying up loose ends before applying is a good idea.
Intermediate methods of building credit are also a good option. A credit builder card may not have a very competitive interest rate, but is a good stepping stone to better credit scores.
A surprising way to boost your credit score is by registering to vote. Registering is quite straightforward and will have a positive affect on your credit score.
Consider also the timing of your application. If you have recently been turned down for credit it will have a temporary impact on both your credit score as well as the impression you make on the bank viewing your credit file. It could be better to wait a while before you make another application. Furthermore, if you have changed job or residence recently it can have a negative impact on the likelihood of your application being accepted.
While these steps are a good start to getting your profile application-ready, there are some other factors to be aware of:
If you have filed for bankruptcy in the past 6 years it will leave a negative mark on your credit history, as will a County Court Judgement ruling against you or if you have entered into an Individual Voluntary Arrangement. Details of late payments in the last 3 years will also show up. Making only the minimum possible repayments on a credit card debt also has a negative impact.
It may seem strange, but having no credit history whatsoever is also bad for your chances of a successful credit card application. This is because lenders look to your credit history to see if you repay amounts owed on time, and having no borrowing history leaves them with nothing to go by.
Another counter-intuitive situation is where you might borrow small amounts and pay them back on time, but this can also in some cases work against you as you may not be seen as a profitable prospective customer by the bank or building society. That being said, it is of course always better to have a less extensive but orderly credit history than one with lots of borrowing and some missed repayments.
Overall it’s wise to take stock of your credit score situation before making any applications. Then you can see what possible measures you can take to improve your score to a sufficient level that will allow you a good chance at successful application to the card that matches your priorities. With this information in mind, you should proceed with a bit of caution and keep researching since the requirements for different cards can change and also your credit score can change while you are shopping around for the right deal.
Getting your credit score in order:
Not having the credit score necessary for the card of your choice might be due to a number of factors including not having sufficient credit history, and its not always due to mismanaged lending in the past. Regardless of the need to increase your score, there are some straightforward best practices that could steadily increase your profile enough to get the card you want.
Of course, some of these measures will take time while others should see a quick increase in your score. In any event, you should be informed of the ins and outs of credit scores before you start planning on how to make successful applications.
The first thing to do is get an overview of your credit profile with the three main credit scoring agencies: Equifax, Call Credit and Experian. You can even get an instant improvement in your score if you establish some details in your file as incorrect, in which case the company will make the necessary adjustments if you provide sufficient evidence.
There is a fee for each of these checks on your file. But the good news is that you are entitled by law to access the information and furthermore if you only need to check once then you can always avail of a free trial of the checking service and cancel before fees start to kick in. Other agencies such as ClearScore have free services although the detail of these scores are not as high and there is a large aspect of affiliate sales involved (where the site will promote a certain credit solution to you based on their partnerships with banks).
Before you start planning ways to improve your score, think about what you need to improve it for. If you weren’t planning on making an application for a card with high requirements in the near future and don’t need something like a 0% purchase card for a big expenditure soon, then you could always just opt for a credit builder card.
While their interest rates and credit limits are not as good as other cards, they have many advantages. If you only need a small amount of credit, know you can clear the balance each month, and want to build your credit score then a credit builder card could do all three in the short-term – taking the pressure off the need to rebuild your score quickly.
If a credit builder card won’t do the job, perhaps look into getting a loan or overdraft from your bank. And if this is not a possibility and you really need to improve your score for what you’re after, then you should try to get an idea of the gap between where your score is now and what you need it to be. If you make some wise moves you could see a noticeable increase in your credit score in 30-60 days.
Other things you can do to improve your score:
Here we’ve categorised some of the important terminology used regarding credit cards.
Monthly statement: Sent out every month and details all transactions on the card for the previous month, as well as listing when the repayment or balance clearing for that month is due (usually 3 weeks later). Also shows the minimum repayment needed to avoid charges.
Annual fee: Certain cards offer a range of benefits in return for spending, which is particularly the case for cashback and rewards cards. This fee could be as high as a couple of hundred pounds, so it’s important to weigh the benefits of the perks vs the annual cost.
Card issuer: The card issuer is the company or bank providing the card, e.g. NatWest. It is important to know this does not refer to the type of card, e.g. Visa or MasterCard.
PIN: The important security code needed to use the card, never share it with anyone as a rule.
Credit limit: A variable amount (set when you first get the card but liable to increase over time) that determines how much you can spend or owe without incurring extra charges.
Credit score or credit rating: This is based on your lending history and is recorded by companies such as Equifax and Experian. It’s important in determining which cards you will be eligible for, and also how much APR you will pay once your application is accepted. This of course changes over time and can be increased with good repayment practices.
Minimum payment: The amount you need to pay monthly to avoid charges. This will be set regardless of how much you owe, and it’s important to know that even if you keep making the minimum repayment it could still take a long time to pay off the debt as existing interest can keep accruing.
Balance: The outstanding amount you owe of the credit card based on fees, charges and amount spent.
Interest: The charge or fee levied by the bank or card issuer based on how much you owe and how long it is owed.
Available credit: This is how much you can currently spend and remain under your limit; it is calculated as the limit less the amount of outstanding fees and charges on the card.
APR (Annual Percentage Rate): While there are different types of APR (basically there is a difference between the advertised APR and the APR you are actually offered when your credit card application is successful), this is the rate of interest per year you are charged on any amount that remains outside of an interest-free period. Nearly all cards have at least a month of an interest-free period for most transactions (which can be longer in the case of e.g. a balance transfer), however certain transactions such as cash withdrawals start to accrue interest immediately.
Consumer Credit Act 1974 (CCA): Outlines the legal payment protection offered by credit cards and what safeguards are in place to protect customers. It had a major update in 2006 which had a large effect on payment protection
Consumer Credit Directive 2011 (CCD): A Directive put in place to bring clarity to the application process for credit cards.
Financial Services Authority (FSA): The official Authority that is in charge of regulating the UK financial services industry.
Debt Advice Foundation, StepChange: Two of the number of debt advice charities.
Action Fraud: The police agency to assist with credit card fraud.
Store cards: Offer rewards that can be redeemed in a certain store or outlet for shopping there. Often offered by the business itself.
Debit card: Similar to a credit card, but it only allows you t pay with the money in your bank account. Useful for online purchases similar to a credit card, but does not offer the same protection.
Money transfer card: In exchange for a fee, these cards allow you to transfer money from your card to your bank account, making them useful as a source of cash.
Cashback credit cards: In return for making certain kinds of transactions (usually purchases), you will be given an amount back in cash. Very suitable for those that always pay their balance each month, as they can have high interest fees in the event of not repaying each month.
Rewards cards: Similar to cashback cards, except the benefits they offer are typically tied to a certain outlet or merchant. While the amounts gained are typically higher than with cashback cards, the downside is that there is less flexibility in how you can redeem the reward.
Credit builder cards: These are a good option if you don’t have a high enough credit rating for some of the cards with higher application requirements. While they have a higher APR than others, they can be used to increase your credit rating over time and have lower entry requirements.
Balance transfer card: Ideal if you want to bring a credit card debt under control from another card. These allow you to transfer the balance to the new card and avail of an interest free period where the debt is essentially frozen and no new fees accrue. This enables you to pay off the debt and get it under control in return for paying a fee on the amount owed.
Contribution or Affinity cards: These are offered in partnership with an organisation or charity and each time you use the card an amount is donated to that organisation, making them a great way to support a cause while spending.
Purchase cards or 0% purchase credit cards: Purchase credit cards are ideal if you have a big spend coming up that you want to fund without having to save up front or pay interest on a loan. They can be a very cheap way to get credit for a large purchase like a kitchen renovation or expensive electronics. The amount debited to a 0% purchase credit card will not accrue interest at all in the interest-free period, so it functions as an interest-free short-term loan.
Interest-free period: For certain cards (such as balance transfer and purchase cards) an interest-free period is offered during which you can repay the amount without interest accruing. It is important to repay within this timeframe as the interest rate can be high when it ends.
An interest free period also applies to standard cards: this is when you have made the transaction but your monthly bill due date has not passed, so you have been able to make this expenditure on your card without having to pay any interest on it.
Promotional rate: This is an interest rate that is offered by the issuer or bank for an introductory period, after which a standard rate of interest will start to take effect.
Statement date: This is the date that is the last day of a given monthly billing cycle, and transactions made before this date will show up on the month in question’s statement while transactions made after this will be included on the next month’s statement.
Payment due date: This is the deadline before which you need to pay the previous month’s minimum repayment to avoid charges and potential impacts on your credit score.
Cardholder: The main cardholder is ultimately responsible for the credit card and any debts incurred regardless of who uses the card. Joint account holder setups are also possible, where both people listed as account holders have equal authorities and responsibilities regarding the card. An authorised user doesn’t have responsibility or authority for the card, but is named as someone who can use it.
Payment protection insurance: This insurance can help if you find yourself unable in the long or medium term to make your repayments due to unforeseen circumstances. The insurance company will assist in resolving debts and minimum repayments, but of course like all insurance you must pay a premium for this protection.
Currency conversion fees, foreign transaction fees or foreign purchase fees: One of the main drawbacks to using your card abroad, these fees are levied on any purchase or transaction you make outside of the country. Overseas spending credit cards have lower or no fees in this regard in some cases.
Balance transfer fee: As mentioned above, balance transfers are a great way to get spending under control. However, they come with a fee, a percentage of the amount transferred.
Cash withdrawal or cash advance: If you withdraw cash from an ATM you will be charged a fee on the amount withdrawn and also any interest on the amount will start to accrue immediately.
Adverse credit: Another term for a bad credit history, this is were your credit score has been lowered due to previous debts and lending.
Default: You should avoid default where possible in order to protect your credit score. Default is when the credit card service is terminated by the bank due to excessive amounts owed or failure to meet the terms and conditions.
Temporary authorisation: This is a transaction that has not taken full effect on your account but has been approved. It usually takes a number of days for this to turn into a posted transaction. In the meantime, however, this amount is deducted from your available credit. This payment feature is used also in the case of services that you have essentially put a deposit down for (such as hotel room expenses) that will then be cancelled by the merchant in the event that you did not avail of them, stopping them from becoming authorised transactions.
Credit card cheque: Similar to a cash withdrawal, this is where you use your card to write a cheque. Just as with a regular cheque, this is then debited from your account. They have costs involved, such as interest being levied immediately (no interest free period) as well as a percentage charge.
Credit card fees and charges explained:
Credit cards offer a secure, protected and convenient way to make payments, and also give a great degree of financial flexibility. The main benefit offered by a credit card depends what you using it for, whether it’s to fund a large purchase, enjoy rewards for certain kinds of transactions, or simply as an extra source of liquidity.
However, the main pitfalls of credit cards to be avoided are the fees and charges that can be levied. These range from the standard interest rate fee, to default charges for missed payments, to unexpected charges such as closure fees. Here we’ll outline the main fees to be aware of.
Some fees are often overlooked by customers when applying for a card. Fees like interest are usually what people are wary of when it comes to credit cards, with the assumption being that the less you spend on your card, the less likely you will be to face charges. But this is not the case, other fees apply regardless of how much you use your card, and may apply if you don’t use your card enough! For example, many cards charge a flat annual fee on top of any other costs.
This varies from provider to provider, and is particularly relevant to premium cards that offer perks. It’s worth having a look at what the perks versus the annual fees are, and whether it’s worthwhile for you. Also be aware that the first years annual fee might be waived by some providers, but you should still take into account that you’ll have to pay this going forward.
Inactivity fees are another thing to be careful of. Some cards levy fees if you haven’t used your card for a certain period (usually 12 months). An unused card might also be cancelled by the provider. This brings us to the next overlooked fee, that of an account closure. In some cases, the provider will charge a fee for terminating the card service, so be careful of this too.
The main fee to be aware of with credit cards is the interest rate. Most cards levy an interest rate of around 19% per year, known as the Annual Percentage Rate, APR. This charge kicks in on any amounts you haven’t cleared at the end of the month. This may not be the case for some cards, for a card with a 0% introductory rate on making purchases, you may be exempt from having to pay this fee for a period.
Interest fees can be a particular risk when using your card for certain kinds of transactions. Withdrawing money from a bank machine with your credit card is usually not a good practice. As soon as you make the withdrawal, you will start incurring a high interest rate (usually in the region of 28%) straight away. This is called a “cash advance”, and should be avoided where possible, especially since another fee for cash withdrawals of roughly 2% will also be charged immediately on the amount withdrawn.
When using your card, be aware of your credit limit. A credit limit fee will be charged if you exceed this limit. You’ll also have a minimum repayment defined for your card usage, and you need to make this repayment each month. If not, you’ll be charged what’s known as a “default charge”. Both the credit limit fee and default charge usually amount to around £12.
Using your credit card abroad can be a bit of a minefield, and there are a variety of possible charges depending on your card. When making purchases with your card abroad, you could be charged for the conversion fee, so choose to pay in local currency where possible. In any event, you’ll probably be charged around 3% per transaction. Avoid using your card to buy foreign currency, as this could entail charges from both the currency provider and your credit card company. And withdrawing cash abroad is also not ideal with your credit card, since you’ll be charged around another 3% on the amount withdrawn.
Balance transfer fees are something else to be aware of, but in general for most people using a balance transfer, the benefits outweigh the costs. Balance transfers are useful for reducing credit card debt, since you can transfer the debt to a card with a more economical interest rate setup. This can be very useful for getting any outstanding debt under control. However, the transfer has charges involved, often around 3% depending on the card (with some charging a much lower fee).
There are many kinds of credit card fees to be aware of, but thankfully these days the provider needs to be upfront about them, and with a little research you can easily learn what fees apply to your credit card use, and have that info in mind when making transactions. You will then be able to use your card with peace of mind that you’re not racking up unknown charges.
Here we’ll outline some of the main charges and fees that can arise when using your credit card. If used properly credit cards can be a source of extra funds and result in a big net positive for your financial standing. But without being fully informed there is a good chance you’ll see charges levied, which will also affect your credit score in some cases. It’s also worth being completely up to speed on the types of charges since it might also help you make a better decision about which card to use, since switching cards for different purposes is often a good idea.
The most obvious charge to be aware of is that of withdrawing cash at the ATM. The first problem with this is that there are usually interest fees (normally higher than your normal interest rate) that start accruing immediately on the withdrawn amount, unlike other purchases that allow you time to pay back the amount before interest is levied. Another issue is that a charge will usually be put onto the amount withdrawn at about 2 or 3%.
Using your card in a foreign country is a minefield of charges, including cash withdrawal fees, conversion fees and in some cases prohibitive interest rates. It’s wise to review these charges before spending with your card abroad – and it may be better to have an alternative lined up such as a foreign currency card or an overseas spending credit card which will allow you to avoid these charges.
When you get your card a credit limit will be agreed with your bank. There are charges that kick in immediately if you go over this amount. If it is a once off occurrence then you might be able to have the charge waived, but it’s better not rely on this.
Your card will have a minimum repayment amount specified which needs to be met each month or a charge between £10-£15. What’s worse is that your credit rating will suffer. Even if you meet the minimum repayment, this will not guarantee that the interest on the account will not keep mounting, so it is important to try and clear as much as you can or the debt could last for much longer than expected.
If you are stuck with a credit card debt that is hard to get down, you may want to consider a balance transfer card, which allows you to transfer the debt to a card which will halt the interest increases for a time while you pay it off (in return for a fee usually, but in some cases there can be no fee charged).
Charges on credit cards are often quite easy to avoid, and if you manage to do so you’ll avoid having a reduction in your credit score. Using them well opens up a range of benefits including payment protection, financial flexibility and even an increase in your credit score.
Credit builder cards explained:
There are many people who due to credit history or other factors fail to qualify for the credit card of their choice, but fortunately there are many ways to improve your credit score to widen the range of offers open to you in the future. One such method is by using a credit builder card. These function very similar to other cards in all respects, but have lower application requirements as well as higher restrictions and fees for use (for example, an interest rate 30% APR is not uncommon with these cards, and they will usually have lower credit limits than other cards).
Once accepted for a credit builder card, you will have the opportunity to use it to steadily increase your credit profile and open up the possibility for other types of card.
You should also bear in mind that it is not only dependent on your credit score, there are also other factors that could negatively affect your chances:
So by using a credit builder card and addressing some of the issues mentioned above, you should have all bases covered for improving your credit profile.
These cards have lower application requirements, lower spending limits and higher interest rates than with other cards. But its important to remember that if you stick to the repayment schedule the interest will not accrue on any amounts owed, so you are essentially borrowing money for free if you pay it back within about a month to 6 weeks.
There are also other types of card that function very similarly to credit builder cards. Prepaid cards (where you top up the balance for use later) have fees involved, but yu can come to arrangement with the provider to loan you the amount of the fees for12 months up front, and then pay the fees back over the course of a year. This means you have essentially borrowed money and started paying it back over the course of a year, so this is a handy trick to improve your credit profile as this information will be sent back to the credit agencies which will then be viewed when you make an application for a credit card. This loan-of-sorts is also interest-free.
So there are a couple of options for building your credit, but it’s important to bear in mind that there is a right and a wrong way to go about applying for any card. Don’t make too many applications at the one time, since this effects your credit score negatively. Also, don’t presume you will be successful for any application and plan around that, since there is always a chance that something won’t go as planned.
A good idea is to draw up a plan for your spending over the next 12 months, and where you want your credit profile to improve in that time. Then make a list of appropriate cards and maybe get a copy of your credit report and use some of the online eligibility tools to see what cards you would have a good chance of getting. With all this in mind, you should be in a good situation to decide if credit builder cards should be part of your financial plan.
No matter what type of credit card you apply for, there are a number of things to keep in mind. Using a well-thought out approach taking all factors into consideration is a good way to go about planning, applying for and managing your credit cards, and working through the steps in advance will make sure you have all bases covered. Here are some considerations to keep in mind when preparing to apply.
Take stock of your credit and financial circumstances, and what you need the card for.
You should have a clear picture of your finances and credit score, and a rough financial outlook for the coming 12 months while planning your applications. Check your credit score with one of the leading credit agencies like Experian. Then see if you can think of any extenuating circumstances that might bring about uncertainty in the next few months (such as a planned job move or moving house). With these things in mind, you should have an idea of your credit worthiness from the perspective of lenders, as well as an idea of your own confidence in being able to make repayments on time.
Next think about the purpose of applying for the credit card. Is is for spending on a trip or big purchase? In this case, a 0% purchase card could be the right option. For bringing another credit card debt under control, a balance transfer credit card could be an option. If your looking to make money back on spending, a cashback credit card might be best.
With an idea of the ideal card in mind as well as your credit score, try and estimate your chances of being approved for the ideal card. You can use one of the many online eligibility checkers to get an insight into your chances of success. If it seems like there is too much doubt as to whether or not you’ll be approved, perhaps consider a credit builder card or taking steps to improve your credit score before applying.
It’s important to keep in mind that you may not be offered the advertised APR for a given card. This is because lenders are only obliged to offer this rate to 51% of applicants. You may be offered a higher rate or a shorter interest free period after applying.
At this stage you should have an idea of your main needs and options, as well as any notable risks. You should be in a good position to navigate the application process wisely.
You can then start the application process. It’s best to have a few backup cards you could apply for in mind also. But be aware that it’s not a good idea too apply for cards in too short a time-frame since this will leave a mark on your credit score.
It’s better to apply online since this could save a lot of time in sending post back and forth. Also, there are some offers that can only be availed of by applying online. You can even find out instantly if your application has been accepted. Make sure you take your time when applying, ensuring you’ve gone through the steps correctly.
If you’ve completed the application online and been approved, you can expect to receive your card in the post in around 2 weeks.
Charge cards explained:
Charge cards offer much the same payment and purchasing options as credit cards and function in a very similar manner. They have a similar appearance to credits as well. There are, however, important differences.
What can’t you do with a charge card that you can with a credit card?
The main difference with charge cards relates to how often you need to clear the balance on the card; with a credit card, some of the negative balance can be rolled over to later months, effectively allowing you to use them to borrow money over a longer time-frame .
The balance on a charge card must be cleared at the end of each month – there can’t be a negative balance on the card going into the next month or the cardholder might face fees.
One of the main risks with credit cards is a build-up of debt. Despite this, they are a convenient payment method and allow for flexible budgeting. Charge cards give the same handy payment possibilities without the risk of debt building up. There is the chance of exceeding your budget by spending too much in one monthly cycle (especially if you don’t fix your payment limit in advance), but the risk of unmanageable debt is generally much lower with charge cards.
One disadvantage of charge cards is the fees associated – usually around £100 per year or more. One of the things you may get in return is a list of perks you can avail of with your card: things like breakdown cover, concierge services, travel insurance, reward programs and access to airport lounges are common. The amount and value of perks varies from card to card. It’s important to weigh up the fees versus the perks of a charge card to determine if the extra costs make sense for you.
Charge cards are also advantageous to business owners. If your employees charge expenses, charge cards are a good way to limit and get an overview of staff-members’ expenses per month. Charge cards allow your employees to spend on things necessary for your business without any risk of high interest fees or debt accumulating beyond the monthly repayment time-frame, and also give you an easy way to view these expenditures.
Similar to credit cards, there are requirements for each charge card that need to be satisfied in order to get the card. In many cases these are stricter than the average credit card application requirements. It’s best to verify these requirements before application. In most cases, there are minimum annual or monthly income requirements, which differ widely from one charge card to the next.
One of the biggest benefits of credit cards does not apply to charge cards – the right to also hold the credit card company liable for refund of products or services if you are unhappy with their quality or durability. This is right is protected for credit cards customers under the Consumer Credit Act (Section 75). Unfortunately this section does not apply to charge cards. A direct refund is usually still possible (known as a “chargeback”), but if the seller has gone bust or doesn’t respond to communication, the charge card company is not ultimately liable (which is the case with credit card companies).
Section 75 covers any purchase that costs from £100 to £60,260 made in whole or in part with a credit card (meaning the full amount does not have to be paid with the card, just a portion). This is not the case with charge cards, so if a chargeback is not possible there may not be any other steps you can take to get your money back in the event of unsatisfactory products or services.
The key to finding the right charge card is research – consult the web and shop around, comparing cards from each provider. The offerings will vary widely in their requirements, perks offered, and terms and conditions.
The annual fees that apply to different cards are the main consideration; while some offer generous perks for a high annual fee, others can be more budget-friendly. Whether this makes financial sense also depends on your spending habits – if you travel a lot, for example, the right charge card might save you a lot of money in the long-run. So look for a card that could give you the most benefit for your fees paid, and one that suits your budget.
From a financial perspective, charge cards can be a less-risky alternative to credit cards since they require settling each month. However, without setting up spending limits, the possibility of debt build-up, extra fees or card cancellation remains – and the amount still has to be paid back at the end of each month so that needs to be kept in mind.
That said, charge cards are a sensible option, and can be particularly good value for those that travel a lot, or for business who want to keep a handle on their employees’ monthly expenses since they allow easy expense overview and monthly expense caps.
So weigh up the annual fees versus the perks, whether or not the monthly settling requirement suits your spending and budgeting, the terms of each charge card, and bear in mind the lower purchasing protection offered compared to credit cards, and you should be able to make an informed decision when looking for a charge card.
Cashback cards explained:
These cards are similar to rewards cards. They are a great option for those that can be sure to be able to pay back their balance in full each month, allowing you to actually earn money with your card in some cases. This is particularly the case for those that spend a lot, where the cashback exceeds the annual rate charged. Her we’ll discuss some of the benefits and drawbacks of these cards.
The advantages are straightforward: you get a percentage amount back on the amount that you spend. This percentage rate varies by card, you can expect between 0.5% and as high as 6% in some rare cases. This will depend on your spending and also might be a little more complex to calculate – sometimes there will be a higher introductory cashback rate which reduces over time, and sometimes there will be a combination of rates depending on the type of purchase and amount spent.
While they are a great option for the reasons outlined above, there are some other things to keep in mind when using them.
The main thing to be concerned about with cashback cards is the high interest rates that can be levied in the event that you cannot clear the amount owed each month. These cards are designed with clearing of the debt each month in mind, so typically the interest rate levied will be higher than for other types of card in the event you can’t pay off the balance each month. This also increases the risk of charges accruing on the account in the long-term.
Credit cards are popular for a reason, but for many (especially those who haven’t used one in the past) the wide range of benefits and pitfalls are not apparent. Credit cards are not just a means of spending, they can be used to manage existing debt, borrow for cheap, or even earn money. That being said, there are a number of issues to bear in mind to get the most of you credit card. Here are some of the main pitfalls, and further down you can read about the wide range of uses they have.
Credit cards come with their share of security risks. While cash isn’t the most secure either and debit cards can also be compromised, it’s easier for fraudsters to get their hands on your credit card details and use it without your knowledge. Have a look at our post on credit card security for more details on how to keep your card protected.
There are a range of charges you could be levied depending on how you use your card. Some you may not be aware of (such as the fees for closing your account or leaving it inactive too long). There are also a range of fees for withdrawing money, especially abroad. When you take cash out at the ATM with your card you will be charged interest starting immediately, and also have to pay a fee on the transaction.
In the case of using your card abroad, you could also be charged conversion fees among other things. If you read the terms and conditions of your card carefully before using it in a way you haven’t before, you can avoid most fees. Have a look at our posts on using your card abroad and credit card charges in general to get up to speed on what to look out for.
You can be charged for missing a minimum repayment and going over your spending limit, which could compound any interest you owe on outstanding amounts. This could start to add up, especially since with some cards the interest rate can increase over the lifetime of the card (as with purchase cards, for example).
This can result in a situation where it could take a long time to pay off the debt at the minimum repayments. If you keep an eye on the amount owed on the card and don’t use it in a way you had not originally intended, it can be easy to keep the debt under control.
In contrast to the previous point, credit cards can also be used to keep your debt under control. If you have an inconvenient outstanding debt with another card then a balance transfer card allows you to switch your balance over to the new card and not pay interest on it for a set period while you pay it off. There are drawbacks, including the fee levied on the amount you transfer as well as the risk of interest rates going up again if you can’t pay off the debt in time.
Other options such as money transfer cards are also a good way to get debt under control. They allow you to withdraw a certain amount as cash from your card (for a relatively lower fee), which can be used to pay off other debts.
All credit cards function as short-term loan facilities since there will always be an interest-free period (depending on the transaction). Furthermore, cards such as a 0% purchase card allow you to make a large expenditure and not pay any interest on the amount until a set time, which essentially functions as a short-term loan with no interest.
However, if the amount is not paid off within the interest-free period there can be high interest rates charged on anything remaining so this is something to keep in mind.
Protection on transactions and purchases
One aspect of credit cards you might overlook if you haven’t used one before is the extensive payment protection they offer in comparison with cash or debit cards. Under Section 75 of the Consumer Credit Act, if any purchase between £100 and £30,000 is made in whole or in part with a credit card and the goods or services weren’t turn out to be unsatisfactory (or not what was advertised), you can get the money back from your card provider (who will then try to get a refund from the supplier of the goods or services). This protection applies even if the seller has gone bust or is not responding to communication.
It’s worth mentioning that this Section doesn’t apply to charge cards, and also that you may not be able to avail of the protection if you were deemed to have not used your card securely or the transaction.
Rewards and cashback
Some cards offer extensive perks and benefits for using them. They are ideal for those that can always clear the balance each month and spend enough to warrant the annual fee. As the names imply, in return you can avail of rewards in the case of rewards cards and cashback in the case of cashback cards.
The value of rewards on offer is usually higher with that type of card – but the catch is that they must be redeemed with certain merchant whereas the cash redeemed with a cashback card is just put onto your balance and can be spent anywhere.
Another more obvious benefit of credit cards is the convenience of being able to pay online, and also the advantage of having another means of spending while abroad If the card is lost or stolen a quick card to your bank can have the card cancelled and you can then be sent out a new card quite quickly.
From a financial management (as well as a credit scoring) perspective, the less cards you have the better in most cases. It is easier to organise and keep an eye on your finances, and is also more secure since you only have one card to keep an eye on. This almost contradicts the adage that you should always use a credit card with a specific purpose in mind.
But a balance transfer and purchase card can fulfill two requirements at the same time, in a cost-effective way.
Balance transfer cards allow you to take a debt that is racking up interest on another card, transfer it to a new card for a fee, and avail of a lower rate or zero rate on the new card for a period. This can allow you to start paying down the debt without the charges and fees continuing to increase.
A card that offers an arrangement like this enables you to make purchases (within a limit) and not have to pay any interest on the amount for a set period. This can function like a very cheap (or free) short term loan. This kind of offering is very useful for big purchases such as a new computer. It’s worth remembering here that the payment protection offered with credit card purchases is one reason to use them for spending like this.
In many cases, you can get a combined credit card card that offers both these benefits in one. For example, you could avail of one of these cards and transfer a debt that is incurring interest on another card, and also use it to make a big purchase like a new fridge. If you are certain you can pay the transferred debt, the cost of the new purchase and the balance transfer fee within the interest free period, you have essentially taken care of an old debt and got an interest free loan for a (payment protected) new appliance in one.
There are of course fees associated with balance transfer, usually a percentage of the amount transferred. Furthermore, since a balance transfer and purchase card has such handy benefits during the interest-free period, you could be facing steeper charges and fees if the balance is not cleared within that period. It might be the case that having two cards for the different purposes allows a better deal overall.
Look into your financial plans and what your requirements are, and then see if a Balance transfer and purchase card would suit you.
An introduction to using credit cards abroad and their benefits:
When planning your holiday, the first thing that’ll be on your mind is making sure everything goes smoothly from a budgeting and payment perspective. A credit card can be of great benefit, and provide extra options for your trip.
One of the obvious benefits of a credit card is that it simply gives you another payment option – it’s always best to have an extra safe source of funds while you’re away. But on top of this, credit cards can give other advantages over other methods like cash and debit card.
The main advantage a credit card offers is payment protection – under Section 75 of the Consumer Credit Act, if any purchase between £100 and £30,000 is made in whole or in part with a credit card and the goods or services turn out to be unsatisfactory or not what was advertised, you can ask for the money back from your card provider (who will then try to get a refund from the supplier of the goods or services).
Another advantage over cash is that if the card is stolen or lost you can have it cancelled immediately and get a new one sent out, usually quite quickly. This gives extra assurance that you’ll always be financially covered when abroad.
And obviously, credit card are quite handy, often easier than carrying around cash.
If these advantages seem worthwhile and you’re shopping around for a card, it’s worth mentioning also that some cards are particularly suited to use while traveling. Travel credit cards have less foreign charges and fees, which can be a drawback with standard cards as we’ll see, and some also have perks like air miles which can be a big advantage.
With the pros of traveling with credit cards in mind, let’s take a look at some of the things to be wary of:
One of the biggest drawbacks to using your card abroad is the fees associated. Without taking foreign exchange or anything else into account, card providers charge up to 3% on any purchase while abroad. This can really add up over the course of a trip, there’s no point in making your holiday 3% more expensive if it can be avoided. This fee can be named differently depending on the provider, so have a look at the Terms and Conditions to see what the policy is (it is usually called a Foreign Transaction Fee or a Non-Sterling Transaction Fee).
Then there are general charges for making transactions abroad in other currencies. When making a purchase, there is often the option to pay in local currency or sterling. You should always choose the local currency. The merchant or the card company might charge for conversion if you choose to pay in sterling.
Charges also apply to cash withdrawal when abroad. This poses problems from two angles. Firstly, if you use your card to take out cash then the credit card provider will often charge around 2% on the price of the transaction. Secondly, there is the issue of interest. Unlike most other transactions which you don’t have to pay interest on if your balance is cleared within a month, a cash withdrawal will start incurring interest immediately.
Charges can apply for money conversion, too. It’s best to use cash or a debit card when dealing with the exchange bureau (ID will be necessary if using your debit card). You will often be charged by the exchange bureau for using a credit card. You will probably often be charged by the card company too as they might consider the transaction a cash withdrawal, and the same charges will apply as mentioned above.
So using credit cards abroad has its pros and cons. In addition to credit card considerations, it’s worthwhile looking at the other options available that can be used instead of (or as well as) a credit card, to make financing your trip go smoothly.
Aside from travel cards mentioned earlier, some debit cards don’t charge for taking out money overseas. Even if they do, this method can also be used to avoid the interest charge involved with taking out money with your credit card.
Another option is prepaid currency cards. This can be a good option if you lack the credit score for a card that s good for use abroad. They are a cheaper way to spend while away since you can load your balance with a foreign currency and then spend it later. Unfortunately, in some cases the provider will have fees and charges for the transactions so try to be aware of those terms before using one.
Then there s the straightforward option of buying the local currency before you go or while in your destination country. This can be a simple and easy option, and if you get a good exchange rate you can at least be sure that you’re avoiding high charges. Another advantage is that you know up-front exactly what it will cost, and you won’t have anything like interest or unexpected charges or fees to deal with later.
Research is your best tool for making a good decision about funding your trip with a credit card. You might find that it’s best to pay for the trip with a credit card, and use your debit card and cash while you’re away (and have the credit card just in case). Or you might find that a travel credit card provides the best value. There is a range of online tools to check things like exchange rate options, terms and conditions of different cards compared, and how likely your credit card application is to be accepted.
How minimum payments on credit cards work:
Credit cards are a convenient way to pay, and also offer the possibility of borrowing money at a low or zero rate for a short period. They come with their drawbacks however, and the best way to avoid these drawbacks is to make sure you understand the monthly repayment aspect of the card well, and then keep to making the repayments where possible.
Charges kick in when you don’t make the minimum payment each month. It should be straightforward to find out from your provider what this repayment should be, and it usually involves an amount as a percentage of the total balance owed plus interest, as well as any charges that you owe. And there might be a minimum amount stipulated, so even if the above mentioned sum is below a certain threshold (for example, £10) you will have to pay the minimum amount anyway. The APR or Annual Percentage Rate is a major factor here.
Paying down your credit card balance as soon as is convenient is usually quite a good idea. While you won’t incur any extra charged if you keep up with the minimum repayments, it’s usually better to pay more off as you can. This is because the interest will still accrue on the amount owed while your making repayment. So it could take years to pay it off if you’re only making the minimum payments.
Part of the reason for this is that the minimum repayment amount decreases as the debt is reduced (since it’s usually a percentage of the amount owed). This gives more financial flexibility since you’ll be required to pay less and less each month, but means that if you stick to this minimum it can take a long time.
It’s better to see how much you can afford and try to pay that amount each month regardless of the minimum repayment. This can have a substantial impact on how long it takes to clear. You can set the amount you wish to pay per month with your bank, and stick to that regardless of the minimum repayment.
And it’s better to get in touch with your credit card issuer as soon as you think you can’t make a monthly payment. You can usually reach an arrangement with them to put a brief hold on any charges, and when you start making the minimum payment again then they waive the charges and there will be no impact on your credit score.
It’s always better to get it paid off as soon as possible, and in event of a risk of a missed payment, keep in touch with your provider.
Balance transfer cards explained:
These cards are great options for those that are looking to get any credit card debt on another card under control. Essentially, these cards allow you to move debt from a card (on which the debt is racking up interest charges) to a new card for a small fee. In return, the new card offers a substantially lower interest rate than the previous card. In many cases there will be a 0% rate of interest on the new card for a set period, giving more flexibility to resolve the debt while keeping it from increasing as you try to pay it off.
Its worth bearing in mind that there is often a limit to how much you can transfer – meaning that you may not be able to resolve an entire bad credit card debt in one go. As always, there are requirements in terms of credit score that need to be met, so some of the best balance transfer cards may not be available. Furthermore, it’s worth bearing in mind that you can’t do a balance transfer within the bank or banking group – for example a balance transfer to a Lloyd’s card from a Bank of Scotland card.
Finally, it’s worth remembering to check the fees involved. Most won’t charge an annual fee but some will. Furthermore, it’s worth checking the interest rate you will be charged in the event that you cannot pay off the amount within the interest-free period. Charges could also be involved in the event that you cannot stick to the payment schedule or miss a minimum repayment. And there will definitely be an initial fee involved, around 3% of the amount transferred, but this will in almost all cases be less in the long-run than the amount that would have accrued on the previous card.
A good balance transfer card allows you to get credit card debt under control in a very transparent way – it’s much easier to manage a debt that is not accruing interest and charges. Aside from this, of course, they reduce the amount you have to pay when used correctly. This is particularly the case with 0% balance transfer cards. This can also help your credit score a lot in the long run.
For some, a combination balance transfer and purchase card is a good option if you’re looking to manage a credit card debt while also intend to make large purchase (and intend to avail of the extensive protection credit cards offer for purchases). While there will probably be a different interest-free period for both the purchase and balance transfer functions (which can be tricky to manage since there are two different rate periods to keep an eye on), they offer extensive flexibility to effectively take care of a credit card debt and get an interest free short term loan for a large purchase at the same time.
While you could probably get a better deal overall with a separate balance transfer and purchase card, there is a lot to be said for managing both on the one card. Of course, there will also be a limit to the amount of the purchase you can make interest free on the card.
These cards are a great way to get a credit card debt under control, and as such are usually worth the fees involved. But be aware of the fees involved, especially the fees that start after the interest-free period ends.