Courtesy of Sainsbury’s Bank, a visual guide to credit scores.
If you’ve got a poor credit history as the result of missed payments, defaults or CCJs, you’ll have a tough job getting access to credit. Bad credit history cards are among the best places to start if you want to put things right.
Bad credit history cards can help you build (or rebuild) your credit rating by giving you the opportunity to prove that you can handle credit responsibly.
Every time you make the required monthly payment on time, your credit score will improve. If you continue to do this over a period of time, you’ll boost your chances of being accepted for a wider range of cheaper credit products in the future.
When they’re used efficiently, credit cards can prove to be a great source of cheap lending. Your opinion on this probably differs if your debts have mounted up and they’re costing a fortune in interest. This is where a balance transfer card comes in handy. Find out more about these credit cards below.
How Do These Cards Work?
Balance transfer cards are perfect for to helping people to reduce their debts. They allow you to move a balance from one or more existing cards onto a new card with a new provider.
Most balance transfer cards offer a 0% interest period, some of which last well over two years. Provided that you make your minimum payments on time, you’ll have this entire period to work on reducing your debts and it will cost you nothing in interest.
So, given that the average credit card rate was over 18% at the beginning of 2014, you could be saving over £180 a year for every £1,000 of debt.
It’s been an eventful time for the credit card market. Competition is hotting up in the market for balance transfer cards (with the longest 0% offer now at a whopping 33 months). And constant technological advances are making credit cards both faster to use and multifunctional.
You may have heard that Transport for London are no longer accepting cash on London buses. If you haven’t got an Oyster card, a contactless card is your next best bet.
If you’re interested in the technology behind the construction of your credit card, it’s all listed here in this fascinating infographic provided by Sainsbury’s Bank.
The UK’s main financial regulator recently turned the heat on the credit card industry, suggesting that too many cards have been designed to lure people into debt. With this in mind, is NatWest offering a change in approach?
Last month, the Financial Conduct Authority launched an inquiry into the credit card market, hoping to find out more about how the industry works with people who are already experiencing financial difficulties.
It also wants to find out whether there are too many hidden complexities in lenders’ terms and conditions.
There are 30 million credit card holders in the UK and 56 million cards in circulation, with many households choosing to juggle several credit cards at once. Latest Bank of England figures show that gross lending on credit cards rose above £13 billion in March. This compares to £12.2 billion a year ago and £11.5 billion in March 2012.
Clearly, the balance between offering credit and remaining responsible is becoming increasingly important for both lenders and regulators to get right.
And one of the problems frequently raised about credit cards is the lack of clear information about charges.
It’s been hard to miss the glitzy balance transfer offers that have dominated the credit card market in recent months. But not everybody believes this is the way forward for credit card customers.
Consumers can currently receive up to 31 months at 0% on a balance transfer (Barclaycard), and up to 18 months at 0% on purchases (Tesco).
But cards of this nature tend to require a flawless credit rating, and not all applicants will receive the maximum offer.
Providers also charge a fee of around 3% for transferring a balance, which helps to compensate for the loss of interest during the 0% period.
In this scenario, a customer transferring a balance of £3,000 would face a fee of £90 in addition to their existing balances.
And because most cards with long balance transfer offers only have short periods at 0% on purchases (typically 3-6 months), customers can easily begin to accumulate interest at a much higher rate if they spend on this type of card.
So, perhaps its time to consider what other options are available.