What are Credit Cards for Bad Credit in the UK?

What are Credit Cards for Bad Credit in the UK - ratewise
by ratewise

Why are credit cards for bad credit used and how can they help you? Credit cards for bad credit are used in situations where a person has a bad credit score or a non-existent credit score. These cards function just like regular credit cards.

Credit cards for bad credit scores are primarily used to regulate your credit score if you take reasonable actions to stay within the credit limit and complete monthly payments.

Using a ‘bad credit’ credit card is helpful for: 

  • People that have recently moved to the UK if they do not have any credit score or any other credit record within the country. People with no credit history can use credit cards for bad credit to start building credit.
  • Young people that want to build a credit history. Individuals who have yet to borrow money or have never owned a credit card can create their records using credit cards for bad credit.
  • Borrowers who want to restore their credit score after going bankrupt. People in this situation need to wait for a certain amount of time before getting a ‘bad credit’ credit card. The reason this happens is that a certain amount of time needs to pass after bankruptcy to be eligible for requesting a credit card.
  • Individuals who had problems with managing debt. Being late for a debt payment can lead to a bad credit score. Credit cards for bad credit are often the solution to rebuilding your credit score in such a situation.

Low Interest Cards

APR
Min. Credit Limit
Max. Credit Limit
34.9%
£250
£1,200
34.9%
£250
£1,200
59.9%
£150
£1,000
Show more

The difference between credit cards for bad credit and regular credit cards

Credit cards for bad credit work on slightly different terms than a normal credit card, even though they have the same function.

‘Bad credit’ credit cards are used to borrow money from a bank. The card allows you to spend the money you borrowed and gives you the option to pay off what you borrowed instantly or later on.

If you choose to pay off what you have spent later, then you are going to pay an additional interest fee. This is how a normal credit card works also.

The only difference credit cards for bad credit have is a higher APR (annual percentage rate).  These ‘bad credit’ credit cards also have a lower credit limit. Think of both of these differences like training wheels on a bike.

They are meant to help build good behaviours when it comes to managing credit. This means that the amount of money you can borrow is low while the interest of the loan is higher than average.

Although, you can prevent yourself from paying interest if you pay off all of the money you borrowed each month. If you pay the balance in full every month for some time, you will start recovering your credit score.

Paying in full amount every month informs money lenders that you are capable of handling credit and that your finances are well in hand.

How to get the best credit cards for bad credit in the UK

Before applying for any ‘bad credit’ credit cards, choose the one that best fits you. To do this you need to go through a handful of credit cards and investigate the features they have to come to a proper conclusion.

1. Check the required criteria for each credit card before applying

The first thing to do if you plan to apply for credit cards for bad credit is to see if you are eligible to apply for it. Here are some things to not skip through when looking for a ‘bad credit’ credit card:

  • Minimum age requirements
  • Income requirements
  • Residency requirements

When you are searching for credit cards for bad credit it is important to make sure you will have a low chance of getting rejected. The reason for this is because the more times you get rejected, the harder it becomes to get accepted for a card in the near future.

2. Look at the interest rate of credit cards for bad credit before choosing

 After making sure that you meet all the criteria regarding the credit card terms, check if the card has a high-interest rate or not. Choosing a high-interest rate can impact you negatively as it will increase the amount of money you will have to repay each month.

3. Do not apply for more than one card at a time

When applying for credit cards for bad credit a ‘hard check’ on your credit gets registered on your credit history. Applying for more than one card at once will increase the number of credit checks on your history, resulting in lowering your credit score.

4. Choose the card that gives you the benefits that best fit your needs

Every credit card has different benefits you get for using the card. The benefits can be 24-hour customer service, the ability to track your credit score, in-app banking, and so on.

Choose the ‘bad credit’ credit card with the benefits that interest you the most. This will simplify the process of building up your credit score.

Five rules to keep in mind before using credit cards for bad credit

1. If your card application has been rejected, never apply for another one instantly

Being rejected after applying to get a card does not impact you too much. The reason for you being rejected may be from many causes such as putting incorrect information on your credit file, a banking error, or not being able to meet the required criteria for a specific card.

Applying for another card instantly could damage your credit score on a huge level. Each of your rejections gets documented and the more rejections you have on your record, the harder it gets to be approved for credit cards for bad credit in the future.

If you have multiple rejections, that can put you years behind on rebuilding your credit score.

The moment you get rejected after applying for a card, you need to see what the problem behind the rejection is and how to solve it. This can be done by viewing your credit reports.

2. Always repay the minimum monthly amount

The best way you can build or even rebuild your credit score is by always paying on time. When you spend borrowed money, you need to pay it off as soon as possible.

Try to set the goal of repaying at least the required monthly minimum. This will prevent you from ruining your credit score in the future. Although, the fastest way to build a good credit score is by repaying in full every month.

3. Do not withdraw money from credit cards for bad credit

Withdrawing money from these types of credit cards is more expensive than it seems. Apart from that, lenders start to assume that you are using the borrowed money just for some fast cash.

This leads lenders to believe that you are financially unstable, lowering the chances of them lending money to you. The interest fee when you withdraw money is much higher than just a normal spending amount.

4. Usually the APR you will get is not what is expected

The law in the UK is that only 51% of ‘bad credit’ credit card applicants will get the actual advertised APR of the card. This 51 % are the people that have a credit score that is slightly higher than others.

If an advertised APR for a card is 33.8%, the chances of you getting that percentage rate are not guaranteed. But high-interest rates are easily preventable. By using these credit cards the right way (repaying on time), you will not pay interest.

5. Avoid borrowing money as much as possible

The primary point of applying for a ‘bad credit’ credit card is to improve your credit. If you get accepted and get a card, the best thing to do is to keep things balanced.

Try to not borrow too much money as this will increase the chances of you not being able to repay the lender.

The advantages and disadvantages of using credit cards for bad credit

Advantages

If you have no option other than ordering a card for bad credit, then some perks come along with it. When ordering these cards, you get:

  • A chance to increase your credit score. If you keep up with your monthly required payments, you will soon be able to rebuild your score.
  • These kinds of credit cards do not usually come with annual fees.
  • You get an interest reduction if you stay within the credit limit.
  • If you have a bad credit score, the chances of getting these kinds of credit cards rather than normal ones are relatively higher.

Disadvantages

‘Bad credit’ credit cards also have a negative side that you need to be aware of before using them. The disadvantages may include:

  • Getting even more points taken off your credit score if you do not repay the monthly required amount of your spending.
  • The cards come with a high-interest rate. This is done to protect the lender if you are not able to pay for the monthly payments.
  • The spending limit is relatively low because you are suspected of having poor money management skills.

Credit cards for bad credit in the UK FAQs

What to do if you have no credit history?

You can easily build your credit score by applying for a ‘credit builder’ credit card.

What credit cards are included in this comparison?

The cards that are mentioned apply only to residents of the UK or individuals that are seeking to live in the UK.

What should I do if I got rejected more than once after applying for a card?

You should not borrow money at all costs. Additionally, try to see what the problem behind why you are not getting approved is.

What kind of credit limit do you get if you use a ‘bad credit’ credit score?

Each card has a unique credit limit you can use. The amount available is just lower than what the average credit card provides you with.

Can credit cards for bad credit lower your credit score?

If you do not use a ‘bad credit’ credit card correctly then it will affect your credit score negatively.

Categories: Credit Cards
Tags: Bad Credit UK