Guide to Credit Cards

Be careful to avoid falling into debt and it is important to remember that you are still essentially borrowing money that is not yours. If you fail to pay your credit card bill, you will have to deal with interest charges and credit card debt can easily spiral out of control. You will also damage your credit score which is likely to have some affect on your financial future when applying for other products and services. With this in mind you should never use a credit card as an easy way of borrowing money.

You need to make sure you read the terms and conditions of the card thoroughly and look out for any annual fees and additional charges such as  late payment fees, transaction fees and how much they charge you for withdrawing money from a cash machine.

Getting approved for a credit card has never been more difficult, especially considering the current economic climate. The financial crisis and recession means that banks have changed the way they decide to lend money. Lenders have become more selective regarding whom they grant loans and credit to, unfortunately this has resulted in more and more people being turned down for the products that they want. Anyone who has had any credit problems in the past will struggle to have access to normal credit cards. A bad credit history will mean you are likely to have a low credit rating and will affect whether or not you are approved. However, no credit history at all will also stand in your way as well as a low income or being self employed.

Your credit file contains all your financial information. Anytime you apply for a loan or credit card, lenders and credit card providers will look at your credit history and credit score when deciding on whether or not to approve you for a loan or grant you a line of credit. Providers will assess how much of a risk you are considered to be. With this in mind, as your credit file is so pivotal in the decision process, it might be worth checking over your report. You can use a credit reference agency to get access to your file. Make sure the information inside it is correct and up to date.

Unfortunately, you can easily damage your credit report. If you have had serious financial problems in the past such as having been declared bankrupt, defaulted on loans, have had any county court judgements, then you will definitely struggle. Things like this can stay on your file for six years.  Even minor mistakes like missing payments on credit cards or personal loans will be used against you.

Fortunately, there are credit card providers who won’t just reject you on the basis of past financial difficulties. If you have been rejected for a standard credit card, you still have options. Bad credit credit cards are aimed at people with a bad credit history who have been refused elsewhere. They are also for people who have little or no credit.  You are more likely to get accepted for one of these cards in comparison to standard credit cards and you can use them as you would any credit card as they have all the same features and advantages.

A great thing about these cards is that they are designed to help you improve and rebuild your credit history as many of them have credit rebuilding facilities. They can also be suitable for those who want to build a credit history from scratch. So long as the card is used sensibly it will help you to repair some damage but please remember that this will take some time. Ultimately however, this will put you in a better footing when apply for financial products in the future.

The main drawback are the high interest rates which are likely to be significantly higher than other credit cards. This is because you are presumed to be more of a risk by the card provider due to your credit history, or lack of it. For this reason the credit limit you are given is likely to be lower. As with any credit card you have to make sure you don’t miss payments which will help you avoid potentially heavy interest charges.

If you don’t want to risk going into debt then a prepaid card could be an ideal solution. A great aspect of these cards is that they have all the advantages of a standard credit card in that you can use them online, in shops, restaurants and withdraw money from cash machines. The main advantage of these types of cards is that you can personally manage the amount of money on the card. They work like top up cards; you preload the card with funds which you then spend as you please and once the funds run out you have to top it up to use it again. This gives the user more control over their spending which is great for anyone who needs to stop bad spending habits.

With a prepaid card you are not being given a line of credit so you are not borrowing any money. This means that there are no credit checks and anyone can get one. These cards are well suited to those who have a bad credit score, are too young for a standard credit card or have a low income. If you don’t have a bank account a prepaid card is a way for you to withdraw money and set up direct deposits. As you are not borrowing any money, but are simply spending whatever you decide to put on the card, you won’t ever have to deal with expensive interest or bank charges or worry about paying off credit card bills each month. However, please note that there may be some hidden charges with these cards such as cash withdrawal fees and some cards might charge you a small amount for issuing you the card or you might even find that some providers charge you a monthly fee. You need to take this into consideration when looking for the best card for you.

Prepaid cards are very secure and can have useful recovery facilities whereby if you lose the card you can order a replacement and any funds saved can be transferred onto the new card. When deciding on the right prepaid card for you it is worth taking the time to research the market.

You need to make sure that you are getting the best card for your finances. With so many different types of credit cards on the UK market you need to make sure you are getting the best deal. Here are some tips to help you do this:

-          Firstly, if you are thinking about taking out a credit card you need to consider your budget and be completely be sure you can afford make the monthly payments so that you do not risk ending up in debt.

 -          There are many types of credit cards so you need to think about what sort of card you want and what you want to use it for. As well as standard credit cards, If you are a student then you might want to think about student credit cards, there are business credit cards for corporate needs and reward credit cards that offer specific reward programmes that can appeal to a variety of lifestyles.

 -          You need to think about your financial history and your credit rating. Unfortunately, as mentioned you credit report will affect whether or not you are approved for a card. If you know you have a bad credit history or little or no credit then you might want to consider credit cards for people with bad credit or prepaid cards. Before you apply you also need to make sure that you meet the requirements which can depend on your age and income.

 -          It is really important that you take the time to compare different cards. The interest rate will obviously be the most important aspect to compare but make sure you look at all of the features of each product. There might be additional offers, rewards and benefits and some providers even offer some great introductory deals but remember to look at what happens when this period ends.

 Before you apply for any card make sure you know the amount of any fees and under what circumstances these fees apply. Common fees include late payment fees, fees for going over your credit limit and annual fees.