Grab your Credit Card

There isn't a single credit card that is perfect for every individual so before you apply think about how you'll use the card:

Are you looking for a card to spend on and if so will you be able to clear your balance in full each month? Maybe you've already got an outstanding debt on another card and are looking to make a balance transfer, but do you want to spend on the card as well? These are all vital questions which will help identify the best card for your needs.

If at all possible, try and pay more than the minimum - otherwise it could take years to clear your debt.

It's a good idea to pay by direct debit - that way you will always pay on time and avoid incurring a late payment fee.

It may be tempting, but try not to use a credit card to withdraw cash from an ATM - you'll probably be charged a higher rate of interest than on purchases and be charged a withdrawal fee.

Keep an eye on your spending and make sure you stick within your agreed credit limit.

It's well worth using a credit card for purchases of £100 or more because you have greater protection than if you pay with cash or a debit card. Under Section 75 of the 1974 Consumer Credit Act credit card issuers and retailers take joint responsibility for faulty purchases. This applies to purchases between £100 and £30,000. If the retailer goes bust or the goods are faulty when they arrive you can claim a refund from the card provider.

Credit card firms these days are picky about their customers. If you don’t have a perfect credit history, you are unlikely to qualify for the best deals - so you can say goodbye to that tempting 0% offer. You might even struggle to get your hands on a standard credit card if a company spots a stain on your credit record.

Card firms carry out a credit check whenever you apply for credit – and many people are given a low score. The self employed, for example, might not be able to demonstrate a regular income. If you are not on the electoral roll it can affect your score. Then there are people on low incomes, or people who work part time.

Of course, people with a low score might also need access to credit – and that’s where a bad-credit card can help. The cards are aimed at people who do not qualify for mainstream deals and are available to a much wider spread of borrowers. Bad-credit cards charge higher rates of interest than mainstream cards, but if you clear your debt in full every month, you won’t pay a penny in interest.

You can find the best deals on bad-credit credit cards using MoneySupermarket’s free, online comparison service.

If you have a poor credit rating and your application has been rejected by a mainstream card firm, you will probably have better luck if you apply for a bad-credit card.

The cards also suit people with little or no history of managing credit, such as young people or stay-at-home mums. They, too, are often rejected by mainstream lenders because they do not score high marks in the credit test.

If you use a bad-credit card wisely, it can actually help you to improve your credit score and so increase the likelihood of acceptance by a mainstream card in the future.

Cards that are aimed at people with poor credit ratings allow you to demonstrate to the lender that you can manage debt. So they can be a sensible way to build up or repair your credit score.

If you use the card regularly and always pay your debt on time, you could boost your credit rating after six months. You could then apply for a mainstream credit card with a lower rate of interest. Think of the cards as second chance credit cards because they give you a second chance to get a good deal on your credit.

There are times when a credit card is a sensible payment choice, for example if you are buying something over the internet. Also, if you make a purchase that costs more than £100 and pay with a credit card, you are protected under the 1974 Consumer Credit Act if something goes wrong.

If you have a poor credit rating, you will pay a higher rate of interest than someone who qualifies for a standard credit card. There are also few – if any - interest-free offers available on bad-credit credit cards.

It’s therefore important not to borrow money on a bad credit card because it will be expensive and your debts could soon spiral out of control. Instead, always make sure that you can pay your monthly bill in full.

Are you sure you need a bad-credit credit card? You can use our ‘Find the right card for you’ tool to see how likely you are to qualify for a more competitive deal. If you want to make a big purchase and spread the cost over the long term, then a credit card for poor credit may not be the best option. Instead, you should consider a personal loan for people with a low credit score.

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