Bad Credit Credit Cards

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You may feel like you’re stuck in a rut if you have a bad credit rating, especially if you would like to apply for a new credit card with competitive interest rates. But there are a growing number of credit cards designed for people with a bad credit rating. And the good news is that they are by far the more obtainable option for consumers with poor credit.

Credit Card Offer Balance Transfer purchase Intro standard purchase
rate duration fee rate duration (variable)

Capital One Classic Credit Card

Ideal card for first time applicants or to rebuild your credit score.

Representative Example: The annual purchase rate is 34.94% p.a.(variable) so if you spend £1,200 your representative APR will be 34.9% p.a. variable% variable.

-% - months -% -% - months 34.94%

 

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An Overview of Bad Credit Credit Cards

Many people develop a bad credit rating by mismanaging a credit card, but there are a variety of other reasons for having a poor credit history. These may include problems with overdrawn bank accounts, unpaid loans, rent, mortgages, taxes and utility bills, amongst many other possibilities. People may also have a bad credit rating for the simple reason that they haven’t owned a credit card before and had the opportunity to prove their responsibility with money; this includes young people, students, those on low incomes and people who have newly arrived in the UK from another country.

You may think that having a bad credit rating would be a barrier to owning and using a credit card, but if you do some research and shop around you will find that UK banks offer cards specifically designed for people with bad credit or no credit history. These products allow you to enjoy the convenience of using a credit card while at the same time providing the opportunity to demonstrate your ability to use a credit card responsibly. If you do manage your credit card correctly and keep your account in good order, your credit rating improves and eventually you are able to upgrade to a card with better rates and extra features and benefits.

When you compare, select and start using a bad credit credit card there are several key features it is important to look out for. Banks are reluctant to lend large amounts of money to people with poor credit ratings, so the credit limits on these cards are generally relatively low. The good thing about this is that it helps prevent you running up a large credit card debt and possibly damaging your credit rating further. Generally, bad credit credit cards also feature significantly higher than average purchase interest rates. For this reason it is best to always pay your monthly balance in full, avoid paying the interest and keep the cost if using the credit card to a minimum. And keeping your credit card account in good shape and your debts low is a great way of improving your credit rating.

Tips for Using Bad Credit Credit Cards

If you are approved for a bad credit credit card, you can use it to improve your credit score by showing that you can pay bills on time and manage your credit properly. Over time, your credit rating may improve to the point where you may be eligible for one of the more competitive credit card offers on the market. Here’s some helpful tips for using your card properly.

Pay off your balance each month: Designed as a credit card for people with a bad credit score, these card offers tend to have significantly higher interest rates compared to more competitive deals. Therefore, you should pay off whatever you owe on the card at the end of each month or face being charged a hefty amount of interest.

Always pay your bills on time: If you’ve taken out a credit card to rebuild your credit, the last thing you want to do is to miss a monthly payment. To stop this from happening, set up a direct debit that will at least pay the minimum repayment on time. Ideally, of course, you would repay the entire balance each month as these cards typically charge a higher interest rate on purchases.

Don’t go over your credit limit: Each account has a credit limit, the amount of money the lender is prepared to lend to you. If you have a credit limit of £1,000 and go over that amount by purchasing an expensive item, you’ll be subject to a penalty charge. Furthermore, going over the credit limit will damage your credit score, which is the exact thing you want to avoid.

Use them to establish your credit history: This type of credit card offer is not just for people with bad credit. They are ideal for people without an established credit record, such as young people or newly arrived immigrants who have not yet had the time or opportunity to build a credit score in the UK.

Common Bad Credit Credit Card Features

Purchase rate: This is the interest that is applied to the part of your credit card bill that represents all the purchases you have made on your card. Credit cards for people with bad credit scores usually have a very high purchase rate. This is the way that banks make money from their customers, but can also be seen as a good encouragement to making sure you repay your monthly balance in full and avoid paying the interest.

Interest-free period: This is the time between you receiving your credit card statement and when interest is applied to your balance. The period is typically 55 days, but varies between different cards. If you can pay before the interest free days expire you avoid paying the interest, after this time the interest is applied and can quickly start growing. You should be aware that the interest-free period is usually only applied to purchases; other transactions such as cash advances start attracting interest on the day they are made.

Credit limit: This is the maximum amount of credit the bank allows you to borrow on your credit card account, and is generally set quite low on bad credit credit cards so you can’t run up a large debt. Again, it should be noted that while the bank permits you to have a balance on your credit card account up to the agreed credit limit, you should always aim to clear your monthly balance in full.

Online account: Your credit card should feature online account management so you can regularly check your statements and track spending, ensuring your account is in good order.

Examples of Using Bad Credit Credit Cards

First-time cardholders: If you have never owned a credit card before, you may find it difficult to get approved for the leading offers because you have no credit history. Banks perform a credit check to see if you have proved you are able to manage your finances and if you have no credit history then they have nothing to go on. A bad credit credit card is a good way of getting approved and start developing a solid credit history.

Rebuilding a bad credit rating: If you have had financial difficulties in the past and now have a poor credit history as a result, this type of card is a great way to rebuild your credit rating. By using your card often and making sure you repay your monthly balance in full, your credit rating improves over time and eventually you can upgrade to a better credit card.

Glossary

Cash advance rate: This is the APR applied to cash advances including ATM and bank branch withdrawals, buying foreign currency and other cash-related transactions. The cash advance rate is usually higher than the purchase rate, and unlike purchases, cash advances start attracting interest as soon as they are made. If you are using a card and want to improve your credit rating, you should try to avoid cash transactions.

Credit history: This is the record of all your previous borrowing and repayments, including late payments, declined credit card applications, and financial difficulties including county court judgments (CCJs) and bankruptcy.

Credit rating: This is also known as a credit score, and is a credit bureau’s assessment of your ability to borrow and repay money from lenders represented as a number. Your credit rating is based on your credit history and current assets and liabilities. When you apply for a credit card the bank requests your credit rating from a credit bureau, and uses it to help make their decision to either approve or decline your application.

Standard purchase rate: This is the rate of interest applied to purchases you make using your credit card, calculated and expressed as an annual percentage rate (APR). Bad credit credit cards tend to have significantly higher purchase rates when compared to other cards on the market.