Credit Cards

Representative APR is the rate that’s often shown in advertising for credit cards. It’s a standard compound rate, which means, it takes into account interest you’ll pay on top of interest, and any annual fees that apply.

To advertise a representative rate, at least 51% of applicants must be offered the stated rate, while the remaining 49% may receive a different rate (usually higher) or be denied. All lenders are required to display examples in the same way, which should make it easier to compare products from the various card issuers and assess the impact of annual fees to the overall cost of borrowing.

The Representative APR includes:

• The purchase (not transfer) rate and whether it’s fixed or variable.
• The representative APR and whether it’s fixed or variable.
• The amount of any annual fee (if applicable).
• An example borrowing amount of £1,200

It doesn’t include:

• Any other fees, such as default or transfer fees.
• The amount of credit you might be offered.

The cost of borrowing assumes spending the entire £1,200 on day one, repaying it in equal instalments over a year, and not borrowing more on the card. But this doesn’t imply a £1,200 credit limit.

Keep in mind that any rates, promotional offers, and the credit limit you may be offered are subject to security and credit checks when submitting a full credit application.

By understanding your financial needs and knowing what to look for, you can find a credit card that suits your lifestyle and financial goals.

Before you start comparing credit cards, we recommend you consider a few key questions:

• How do I plan to use my credit card?
• Do I want to earn rewards or cashback on my spending?
• Do I want the credit card to be my primary payment method?
• Will I carry a balance month to month?
• Am I aiming to build or improve my credit score?

Having clear answers to these questions will help you identify the type of credit card that best suits your needs. For example, if your credit score is low, you might want to consider a Credit Building card. If you frequently travel, a Travel Rewards card could be beneficial. What we encourage you to avoid though, is carrying a balance month to month. Paying your balance off each month is going to maximise the benefit of having a credit card.

Each credit card provider will have its own set of requirements for eligibility, but generally, you must be a resident of the UK and at least 18 years old to apply for a credit card. Some providers may impose a minimum age requirement of 21 or older. Additionally, different providers may have varying criteria such as minimum income levels.

It’s important to remember that applying for a credit card will leave a footprint on your credit file, potentially affecting your ability to secure future credit. We strongly recommend utilising a ‘soft search’ or eligibility check to determine which credit cards you qualify for and to assess your chances of approval before proceeding with an application.

In the majority of cases, passing a credit check is required in order to obtain a credit card. It allows lenders to assess the level of risk involved in lending to you, taking into consideration your income and financial obligations (affordability). Each lender has it’s own set of criteria, meaning acceptance by one does not guarantee acceptance by another.

To increase your chances of approval, it is advisable to use an eligibility checker before applying. All credit card providers will run a hard credit check as part of their application process, regardless of the outcome, which leaves a footprint on your credit report, potentially impacting your ability to obtain credit in the future, especially if multiple applications are made within a short timeframe.

If you check your eligibility for a card, this will only involve a soft check and won’t affect your credit score.

For more information on how credit scoring works, you can read our guide.

Credit scoring is a process used by credit card companies and other lenders to make a decision as to whether or not they want to lend to you. This process is largely based on information they get from the credit reference agencies ( Equifax, Experian and TransUnion) who hold information about your credit history. They will also use information from your application form, and data from any accounts you’ve had with that financial firm in the past.

In general, having a positive record of repaying debt on time significantly increases your chances of approval compared to a history of missed payments.

Read more about how credit scoring works and how to check your credit report for free.

Your credit score will determine your eligibility for a credit card and ability to benefit from cards with better interest charges than others. Simply put, a higher credit score indicates lower risk, making lenders more likely to approve your credit application and offer you better terms.

When you apply for a credit card, there will be a hard check against your credit file so, before you get started, be sure that you have selected the right card for you. We also strongly recommend utilising a ‘soft search’ or eligibility check to determine which credit cards you qualify for and to assess your chances of approval before proceeding with an application.

If you use your card responsibly, a credit card can actually improve your credit score. Responsible use demonstrates that you can handle credit well, you’re responsible with payments and if, you don’t continuously max out your credit card, you can improve your credit utilisation ratio. On the other hand, missing payments and carrying a balance consistently from month to month can hurt your credit score, potentially affecting your ability to secure future credit.

Getting a card with a bad credit score is still possible. Check our Credit Builder cards to specifically help you with this so that you can rebuild your credit rating responsibly.

Getting rejected for a credit card can be confusing since lenders aren’t obligated to explain why. It could be because of a poor credit history or if they consider you a risky borrower. Rejections can negatively impact your credit score, especially if you apply for multiple cards in a short period.

To help avoid this, we recommend using a credit card eligibility checker. It allows you to assess your chances of being accepted for various credit cards without affecting your credit score. A good eligibility checker will provide a service that works with a panel of providers to understand their specific criteria and match your circumstances. This ensures quotability is as accurate as possible before submitting an application.

If you choose a credit card without an annual fee—and there are many available—and consistently pay off the balance in full before the interest-free period ends (typically 56 days), you’ll avoid paying any interest or incurring late payment fees.

If you plan to carry a balance from month to month, you’ll incur interest charges, and missed payments will result in additional fees. It’s crucial to fully understand the terms, conditions, interest rates, and fees associated with your card. By staying informed and spending responsibly, you can avoid unnecessary costs and ensure your credit card serves you, rather than the other way around.

Most credit cards come with a ‘variable APR’, which means that the interest that lenders charge on borrowing (the outstanding balance on a credit card) can fluctuate depending on market conditions. Your lender is obligated to inform you if they plan to change your credit card APR.

Alternatively, you can opt for ‘fixed APR’ cards where lenders guarantee that the rate will remain unchanged for a certain period, although these cards are less common and generally come with higher interest rates.

When used responsibly, credit cards can be a highly beneficial financial tool. However, if misused, they can lead to significant harm with long-lasting effects. Therefore, it is generally advisable to:

1. Understand interest rates and charges
2. Pay off the full balance
3. Manage credit utilization
4. Build and maintaining a good credit score
5. Use credit wisely
6. Be aware of security and fraud prevention
7. Maximise rewards and benefits
8. Use balance transfers and consolidation wisely
9. Manage multiple cards with care.

Take the time to read our full guide on how to use your credit card responsibly to avoid debt, and build a positive credit history in the UK.

Balance transfer credit cards can be a useful tool to use if you’re looking to manage your debt more effectively. These cards allow you to move your existing balance from one or more credit cards to a new card, often with an introductory 0% interest period. This can help you save significantly on interest payments, making it easier to pay off your debt faster. However, this is only worthwhile if you are able to actually pay off the balance during the introductory period so that you can benefit from interest free rates.

Avoid common mistakes when selecting your balance transfer credit card such as not understanding how long the 0% interest free period lasts and not being able to clear your balance during that period – which is the main purpose and benefit of this card.