Is a credit card for bad credit right for you? Read this and find out…
15:19, 03 Feb 2015Updated 15:56, 03 Feb 2015
Sometimes, taking out a credit card might help(Image: )
If you’ve struggled with debt or have no credit history then it can be hard to prove to lenders that you’re ready to be responsible with cash.
And that is one reason why credit cards for bad credit exist, so that borrowers can show they are capable of using credit responsibly and not running into trouble.
But is a credit card for bad credit right for you? Read our guide to find out more…
How do they work?
How bad credit credit cards work(Image: )
Typically these cards will have lower credit limits and charge higher rates of interest, and they usually won’t come with as many perks as a more mainstream card. However, if you can use your card sensibly then it should boost your credit rating and give you a better chance of being accepted for borrowing in the future.
It could even allow you to qualify for a more competitive credit card later on, which can be useful because not all cards are about running up debt – many offer perks such as cashback, air-miles and even cheaper overseas spending.
Have you been turned down for credit?
Have you been turned down for credit?
YES
NO
Are they just to rebuild credit scores?
Not at all; credit cards can be useful in several different ways. They give you a greater amount of flexibility over payment – meaning that some struggling borrowers can move away from payday loans because a credit card typically offers up to 56 days of interest-free borrowing.
Credit cards also give you extra protection when you buy things, because the card provider and the seller are jointly liable. That means that if something goes wrong, you can chase your card provider for a refund if you can’t get one from the seller.
We've got a full report on how credit reports work here, and a guide to the single most important thing you can do to improve yours here.
How should I use mine?
Understanding your credit report can help you get credde(Image: )
Credit cards for bad credit will typically have a fairly low credit limit but a high interest rate to reflect that you’re a riskier customer. That means that leaving a balance on the card will cost you a fortune, but it also defeats the purpose. Clearing your card debt in full every month will usually increase your credit score, or build a positive credit history if you’ve never had a loan or credit product in the past.
Just make sure you only spend what you can afford to repay and ideally set up a direct debit to make sure that the minimum payments at least are paid each month.
Also, never use your card for cash withdrawals as the interest rates can be higher and many card providers will begin charging interest immediately on ATM withdrawals.
How to compare bad credit credit cards
Quite a few card providers offer credit cards for bad credit, so it’s worth taking the time to compare what’s available. Some come with perks such as free access to credit reports or free supermarket loyalty points, while others give you the chance to gradually lower the interest rate.
However, not all bad credit credit cards are suitable for everyone; some are not available to customers with more than one CCJ, others exclude anyone without a UK credit history. It’s important to look carefully and find the card that best suits your needs.
Here are a few more things you can do to maintain a healthy credit report.
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