Know if you're accepted before you apply with QuickCheck

  • Get credit - up to £1,500
  • QuickCheck won’t affect your credit rating
  • Get a fast response in 60 seconds

34.9% APR Representative (variable)
Intelligent Lending Ltd (Credit Broker). Capital One is the exclusive lender

Check Now

top

Where to start

There are a number of advantages to credit cards – the main one, of course, being that they allow you to make purchases and spread the cost over a number of payments. Used carefully, credit cards can have another benefit too – they can help you build a credit history.

But credit cards also have disadvantages – for example, you will pay interest on your outstanding balance if you don’t clear it at the end of the first month.

If you’ve never had a credit card before – or any other type of credit – you might be wondering whether it’s worth getting one. Let’s take a look at some of the things you should consider, as well as some of the questions you might have. 

“You should never borrow more than you can comfortably afford to repay...”

top

I’ve never had a credit card before

Before you start looking for a credit card, take the time to look through your existing monthly outgoings and work out how much you could afford to spend on repayments.  You should never borrow more than you can comfortably afford to repay – even if the credit card company “gives” you a high credit limit. In fact, in an ideal world you’d clear your whole credit card balance each month in full, so that you avoid paying any interest.

It’s normal to have some reservations about opening a credit card for the first time; some people are worried that they can’t trust themselves to spend responsibly, for example. But if you get a credit card with a low credit limit (so you can’t overspend),borrow responsibly and make your repayments on time, then you can build up a credit history as a responsible borrower and open yourself up to better deals and a higher credit limit in the future.

However, if you’re already struggling with money and think borrowing more would put too much pressure on your finances, a credit card (or any other borrowing) is best avoided. That doesn’t mean that you won’t be in a better position to borrow in the future.

top

I could pay the minimum amount every month

If you do apply for a credit card you should be as confident as possible that you’ll be able to make at least your minimum payment each month, so that you’re not hit with any missed payment charges. The minimum payment amount is set by the credit card issuer and can be either a percentage of the balance or a set amount – for example 3% of the balance or £5 – whichever is the greater. However, be aware that if you only make the minimum payment it will take you a long time to clear your credit card bill, and you’ll pay a hefty amount of interest as a result (unless you’re on a 0% deal). For example, if you spend £1,000 on a credit card with an APR of 34.9% and only make the minimum payment each month (in this example, the minimum payment is 3% of the balance or £5, whichever is greater) it would take you over 30 years to pay off and cost you £4,031 in interest alone.*

http://www.moneysavingexpert.com/credit-cards/minimum-repayments-credit-card

 

“Some cards offer 0% interest on new spending for a certain number of months...”

top

What benefits do credit cards have?

Spread the cost

Perhaps one of the first things that comes to mind when you’re considering the benefits of having a credit card is the ability it gives you to spread the cost of your spending. This can be really helpful if you haven’t got the cash or savings in place to pay outright. Some cards offer 0% interest on new spending for a certain number of months, so you may not even have to pay any interest to spread the cost.

Section 75

A benefit of shopping with a credit card that you might not be aware of is Section 75, which gives you valuable consumer protection. Anything you buy with your card that costs between £100 and £30,000 is protected under Section 75, which basically means the card issuer is jointly liable if something goes wrong with your purchase and you need a refund. 

So, if the shop you’ve bought something from goes bust, or your goods turn out to be faulty and you can’t get hold of the seller, you should be able to claim a refund through the card provider. Debit cards and charge cards don’t offer this protection, which is why it’s always a good idea to use a credit card if you’re making a major purchase, as long as you’re sure you can afford the repayments.

Manage debts

Some cards are designed specifically for people to transfer debts over from an existing card and make their repayments more manageable. Known as balance transfer cards, some offer lengthy 0% introductory periods, giving you the opportunity to pay back what you owe over a year or even longer (some cards offer up to 40 months’ interest-free), without being hit by any interest charges.

Balance transfer cards can be particularly useful for people who want to consolidate several balances on to one card, so that they only have one monthly payment to manage rather than several. If they get a 0% deal they won’t have to pay any interest on some or all of the balance either.

There are also credit cards available for those who want to use their card for both new spending and to transfer a balance across. These usually offer a 0% introductory period for both – although there may be a different timeframe specified for each.

You should always try to pay off what you owe during any 0% period to avoid paying interest.

Rewards

Some credit cards offer rewards or cashback and these could be a good choice if you know you can clear your balance every month. However, these cards are usually reserved for those with the best credit histories, so if you’ve had problems borrowing in the past, it might be worth looking at a different type of card.

Be aware that interest charges on these cards can be quite high, so if you’re not able to clear your credit card bill in full every month, then interest charged on these cards will soon outweigh the benefit of any rewards earned.

Read part 2 of our guide here.

Know if you're accepted before you apply with QuickCheck

  • Get credit - up to £1,500
  • QuickCheck won’t affect your credit rating
  • Get a fast response in 60 seconds

34.9% APR Representative (variable)
Intelligent Lending Ltd (Credit Broker). Capital One is the exclusive lender

Check Now