Credit Cards: [The Experts Go-to Guide 2018]

David Allan

Written by David Allan on May 2, 2018

Updated May 5, 2018

Credit cards guide

It is no secret that everyone wants to save money where they can, enjoy luxuries for less and get a cheap deal every now and then. If you are savvy about money, you can make significant savings a lot more often than you might first think. When you properly understand the ins and outs of credit cards, and how to best use them to your advantage, you can begin saving money and getting the cheapest deals effortlessly. Credit is simply a financial tool that you are in full control of, and when utilised in the right ways it can be extremely beneficial to your pocket.

This guide will cover everything you need to know about credit cards to help you make sound financial decisions, save money and find some cheap deals.

Whichever credit card you choose, set up a balance alert via text or email so you can keep track of your spending. Set yourself an affordable limit and your provider can issue an alert when your spending hits that limit.

What is a credit card?

In simple terms, a credit card is a card issued by a financial company or bank that allows individuals to borrow funds to pay for goods and services in shops and online. These funds are then repaid at a later date, along with a pre-determined interest rate or additional charges.

The money spent on a credit card is borrowed from the card provider, as opposed to being debited from a personal account like with a debit card. The card provider will decide on a line of credit for each individual, which sets the total amount, or limit, that can be borrowed on the card at any one time. The amount of this credit will be dependent on each individual’s circumstances, such as credit score, income and repayment history.

Essentially, credit cards are a loan that you spend via a plastic card. Many retailers and service providers accept credit cards as payment. The interest charged each month will vary depending on the financial company chosen. However, many credit cards providers do not charge any interest if the full balance of the card is cleared every month.

Credit cards companies will often ask you what billing date you prefer, if they do not, ask to move your billing date to a convenient time in the month, such as payday. This means you can keep a good credit score and pay bills on time.

How does a credit card work?

How do credit cards work?

Credit cards can be used to purchase anything that you could use a debit card for, they can be used online or in stores to purchase goods and services. The amount spent on a credit card is borrowed from the card provider and must be paid off at a later date. Most credit cards will not charge any interest on purchases if the balance is paid off within the month of purchase, however, if there is a balance remaining longer than this, the amount of interest charged can be high depending on the type of card used.

Many credit cards also have an annual fee or an introductory fee; this amount will depend on the card and the finance provider. In addition to these fees, some cards will also have late payment fees, cash advance fees, balance transfer fees and foreign transaction fees.

Whatever credit card you choose, always try and pay more than the minimum amount every month. This will reduce the interest, and it will shorten the length of the debt. Using a budgeting tool can help you to assess how much you can afford to pay off each month.

What are the advantages of a credit card?

When deciding if a credit card is the right choice for you, it is essential to weigh up the pros and cons and consider when is the right time to use credit over debit. The main advantages of using a credit card are:

1. Simplicity: Credit cards are widely accepted across the globe, making for a simple and easy payment method no matter where you are. Especially with the introduction of contactless payments, purchasing goods in stores could not be easier. Credit cards can also easily be used for online purchase such as products, holidays or services.

2. Safety and Security: If a credit card gets stolen or misplaced, simply call the card issuer to cancel it as soon as possible. If it has been stolen and there is fraud on the account, you are very likely to get all the funds returned to you.

3. Buy Now, Pay Later: In some situations, you may need some funds before payday comes around, so if you do not have the cash required for a purchase, a credit card can easily bridge the gap. This can also be really beneficial for large purchases that you want to pay off slowly over time instead of paying out a big lump sum in one go. Be sure only to spend what you know you can pay back to avoid getting yourself in unwanted debt.

4. Extra Protection: Credit cards offer added protection overspending on debit cards or with cash. For purchases up to £30,000 you will be fully protected under the Consumer Credit Act, so if you book a holiday and the travel agent goes out of business, the credit card issuer will cover the cost for you. You are also entirely covered should you purchase a faulty product from a retailer.

5. Added Benefits: Most credit card companies offer incentives and added benefits to their customers, to get them to choose and stay with them as a provider. Many will provide air miles, reward points or even cashback on the purchases made.

6. Free Credit: Almost all credit cards have an interest-free period, so when all your payments are made on time and balance cleared within the predetermined time, you will have completely free short-term credit.

7. Flexibility: As card providers will give a predetermined line of credit, you have full flexibility to borrow over and over again as long as the payments are kept up. Credit cards also provide complete flexibility on what the credit can be spent on.

8. Build Credit Rating: Using a credit card will actually improve your credit rating, as the account details and payment history make up a critical section of your credit file. Keeping your credit card account in good standing and making regular payments will help to build a good credit score.

9. Easy for Travelling: Credit cards can be used worldwide, and in a range of currencies, so there is no need to carry large amounts of cash when abroad or getting a pre-paid currency card. Be mindful that many credit cards will charge conversion fees, but you can shop around to find a card that doesn’t cost extra for this.

10. Emergency Funds: Credit cards provide a financial safety net that can cover any unexpected outgoings that arise, especially useful if you do not have the cash available in an emergency situation. Just remember that everything borrowed does need to be paid back.

If you want to build your credit score, try and pay off some of your credit card bill in the middle of your monthly payment cycle. Banks often send monthly account reports to credit reference agencies, this could be at any point in the month, not just when you have paid your balance. Paying off a chunk mid-way through the monthly cycle could improve your credit score by lowering your credit utilisation ratio.

What are the disadvantages of a credit card?

Credit cards, like anything, also come with their downsides which should be carefully considered before deciding if this type of credit is right for you. The disadvantages of credit cards are:

1. High-Interest Rates: While many credit cards will not charge any interest if you pay off your balance every month, if you do not clear your balance monthly then the interest rates can be very high depending on the card chosen. You can often end up paying hundreds or thousands more than the initial cost of purchase if you do not keep up with the monthly payments.

2. Damaged Credit Rating: As mentioned above, using a credit card can build your credit rating and help to increase your credit score which is beneficial when applying for other types of credit. However, if you miss payments or end up with ongoing debt on your credit card, they will be recorded on your credit file and will negatively impact your credit rating. This can cause issues later if you want to apply for another type of loan or credit.

3. Fraud: Fraudsters often target credit cards, and there is a range of fraud schemes out there doing just this. While you are protected against fraud with a credit card and will usually be compensated for any illegal transactions on the account, it can be a time-consuming and stressful experience.

4. Cash Advances Fees: Card providers will often charge additional fees for using your credit card for ‘cash equivalent’ transactions. This includes getting cash out, buying foreign currency and gambling, the cash advance fees can often be around 3% for cash withdrawals. In addition to these fees, cash transactions will usually incur a high-interest rate straight away, with no interest-free period like with other credit card transactions.

5. Annual Fees: Most credit cards will have an annual fee on top of the interest rates and other charges. It is possible to find card providers that do not charge an annual fee; however, the norm is to have some sort of fee, even as little as £20 a year. Usually, the credit cards with high annual fees will have additional incentives and benefits for choosing them.

6. Surcharges: Many businesses will apply a surcharge on credit card transactions, and this charge depends on the type of card you have. It can vary between 0.5% – 3% of your total transaction cost.

7. Fees and Charges Add Up: Different credit cards all have different fees and charges associated with them. However, they can add up fast if you do not keep on top of them. Many will charge for late payments, spending past your credit limit, overseas transactions, balance transfers, and annual fees or rewards programme fees. Adding all of these to any interest incurred can add up to a substantial total.

8. Pre-authorisations and Deposit Payments: This is a common occurrence when renting a car or checking into a hotel; the company will take a pre-authorisation charge on your credit card that can be used for any additional charges they need to take from you. This cuts into your credit limit as it puts a hold on the amount they have pre-authorised, meaning you cannot spend that amount while the hold is on, and sometimes it can take a couple of days after the hold being released to go back to normal.

Missing a credit card payment can impact your credit score for up to six years. Setting a direct debit can ensure you never miss a payment. Remember, to always update your credit card provider if direct debit details change.

How to qualify for a credit card

Credit card providers will have some pre-set criteria that they will consider when an individual applies for a credit card from them. When applying for a credit card, it is beneficial to know the provider’s rules for qualifying before completing the application. If you complete a credit card application and get declined, the credit inquiry will be marked on your credit record, so being able to estimate your chances of being approved before applying can really help. There are a few standard qualifiers that nearly all credit card providers will have:

Your Age

You must be at least 18 years old to qualify for a credit card on your own, however, if you are between the age of 18 and 21 and want your own credit card, you will need to prove that you have a steady source of income. Although there isn’t a specified wage that you must be earning to get a credit card legally, the credit card provider will check you are earning enough to repay the credit balance. You can apply for a joint credit card if you do not meet these criteria.

Your Income

As mentioned above, there is no legal requirement for you to have a certain level of income to get a credit card, although you will need to have some kind of income of your own. Since 2011, credit card issuers have not been allowed to consider household income for credit card applicants. Having a reliable and steady income gives you the ability and funds to pay off any purchases made on the credit card. The card issuer will consider if your monthly income is high enough to cover the amount of credit you are applying for.

Your Debts

The amount of debt you are in at the time of applying for a credit card will also be considered. If you have other outstanding credit card balances or loans, they may consider your credit utilisation to be too high and decline the application on this basis. Every credit card provider will have a different amount of debt that they believe is too much, and most will compare any current debts to your monthly income to determine if you can afford the payments.

Your Credit History

If you have a good credit history it will help you get approved for a credit card; the better your credit score, the more likely you are to be approved by the card provider. Credit card companies vary quite a lot on what they will consider for applicant credit scores; some will only accept applicants with a perfect credit record, others will approve applicants as long as they have no late repayments listed in the last couple of years. If you do have a poor credit rating, it does not mean all hope is lost on getting a credit card; there are some providers that will approve applicants with bad credit.

Security Deposits

Sometimes if you are applying for your first credit card and have no credit rating or even those with a bad credit rating, can benefit from a secured credit card. This means a security deposit is taken against your credit limit before you are approved. Some secured credit card issues accept deposits as low as £300, and after making a substantial amount of timely payments, you will most likely improve your credit score and your chances of being approved for an unsecured credit card.

Co-signers & Guarantors

If you do not meet one or more of these qualifying factors and so can’t get approved for a credit card of your own, you can get someone to co-sign or guarantor the application for you. Having a co-signer means that if you do not keep up the repayments, they will be responsible for covering the balance. This can affect the co-signers credit score as well as your own.

Credit card terms explained

Researching and applying for credit cards can be confusing and overwhelming, especially if it is something you have never done before. There is a lot of different terminology used when it comes to credit cards, and it can be hard to follow if you do not know the basics. Here are some of the most common credit card terms explained:

APR

APR is an abbreviation of Annual Percentage Rate, and it is the cost of credit on an annual basis. It shows the rate of interest that you will pay on a credit card balance; the lower the APR, the less interest you will pay back.

Affinity or contribution cards

These are a type of credit card that works in partnership with a charity or organisation. A percentage of each transaction made on the credit card goes to the organisation. Many people use them to show support for a specific charity or organisation.

Balance transfer cards

If you have a significant amount of credit card debt on an existing credit card, you can transfer the balance to a new balance transfer card. These cards offer very low or 0% interest rates for a pre-determined period of time to allow you to pay off the debt. Transferring the money to the new card will often incur a balance transfer fee, which is a percentage of the amount moved.

Cash advance

A cash advance is when you use a credit card to make a cash withdrawal from an ATM.

Credit limit

The credit limit is the maximum amount that can be spent on a credit card at any one time. Spending more than this limit will usually incur a fee. Most credit card providers will increase the credit limit over time if payments are managed well.

Credit rating

Otherwise known as a credit score. This is an assessment that is made by credit reference agencies that determines how much of a financial risk you are to lenders and credit card providers. The higher your credit score, the more chance you have of being accepted for credit.

Default

If you breach the terms and conditions of your credit card, it is known as a credit card default. It can include missing monthly repayments, exceeding credit limits and many other things. If you get a default, it is marked on your credit file and will affect your credit score.

Interest

Lenders and credit card providers will charge you a fee for borrowing money, this fee is known as the interest, and it is calculated as a percentage of the amount borrowed.

Outstanding balance

This refers to the amount of money that you currently owe on your credit card.

Promotional rate

Some lenders will advertise a promotional rate, and this is referring to an offer that is only valid for a fixed period of time. Often promotional rates are low APRs that will increase after the amount of time determined has passed.

Purchase credit card

This type of credit card allows you to make expensive purchases upfront, and they provide an enhanced level of protection in case the purchases are faulty or don’t arrive in time. Some purchase credit cards offer 0% interest which allows you to make a large purchase and pay off the balance over time.

Reward credit card

A reward credit card offers incentives and benefits for cardholders. These are often cashback or reward points and are dependent on the amount of balance remaining every month or amount spent annually.

Temporary authorisation

Temporary authorisation refers to a transaction that has been approved on the credit card but is not showing on your statements or account. The amount of the transaction will be deducted from your credit card and can often take a few days to change to a posted transaction. Temporary authorisations may sometimes expire and revert back to your credit card if the merchant never completes the transaction.

Transaction fees

Some businesses charge transaction fees for paying with a credit card. They cover the cost of processing the credit card transaction and are between 0.5% and 3% depending on the card issuer.

Many credit cards providers will offer a spending analysis tool. This can help you to fully understand where your money is going. If you want to make savings and budget appropriately, make sure to use the spending analysis tools to see what your spending in different categories.

How to choose the right credit card for you?

With so many different credit card options to choose from, it is essential to think about which features you need and want from your credit card. Choosing a credit card is completely down to personal preference and your individual spending habits. It is essential to consider this when choosing a credit card, so you get the cheapest and most appropriate option for you. Here are some important aspects to consider when selecting a credit card:

Can you clear your balance every month?

Paying off the amount you spend every month often means you will not have to pay any charges or interest. If this is the case for how you will use your credit card, the interest rate offered isn’t so important, as it is unlikely that you will ever pay it. Instead of focusing on interest rates, look out for additional benefits and incentives available with different cards. These often include cashback, air miles, vouchers or other rewards.

If you are in a position where you cannot pay off what you spend every month, you will have to pay interest on the amount you borrow. In this case, look for a credit card with a low APR or one that offers interest-free periods on purchases. These types of card will allow you to buy products and services and pay off the balance over several months interest-free. Just be careful when the interest-free period ends, as these types of credit cards will often have a high APR.

Do you already owe money?

Credit cards can be used to pay off existing debts. They work by offering a 0% interest rate for a fixed period, allowing you to transfer the existing debts and clear them without paying additional interest. These types of credit cards are called balance transfer cards or money transfer cards and are useful for clearing existing credit card debts, overdrafts or loans. If you are looking for a credit card to help clear existing debts, choose a card with an interest-free period or a low APR.

Are you choosing your first credit card?

When you are new to borrowing money, lenders have very little information to check on how well you can keep up with repayments. This can make it more difficult to get a credit card with some providers. However, there are some out there that will accept first-time applicants. If you are a student you can get a specific credit card designed for those at university full time; lenders will consider your student loan as part of your annual income.

Do you have bad credit?

If you have made late repayments, exceeded your credit limit or been declared bankrupt in the past, it will leave you with a poor credit rating. This can make being accepted for a credit card difficult as all credit card providers will run a credit check when you make an application. There are some credit card companies that will accept individuals with bad credit, just be sure to find out their criteria for being accepted before making an application.

If you know that it is unlikely that you will be accepted for a specific credit card, then don’t bother applying. Full credit card applications mean that a search is run over your credit score which can impact your credit rating. Only apply for cards where you are sure that you meet the criteria for.

What are the different credit card options?

There are lots of different companies out there that offer credit cards, but the transactions on these credit cards will be processed and handled by a separate company. In the UK, the three main companies that process credit cards are Visa, Mastercard and American Express. Each of these companies will offer different benefits and incentives for their customers, so be sure to consider this as well as the credit card terms from the card provider themselves. Banks and financial lenders offer a range of credit card types that are each suited to different individuals and situations. The main credit card options are:

0% balance transfer credit cards

These types of cards allow you to transfer existing credit card debt onto a new card which will charge no interest. While there is no interest with these types of cards, you will have to pay a transfer fee for the balance, which is typically about 3%. Balance transfer credit cards are great for minimising existing debts, just be sure to know when the 0% interest period ends, as interest will then be charged at the card providers standard rate.

Interest-free credit cards

Some credit card providers offer no interest on purchase deals, which means you will pay 0% interest for a predetermined length of time. These types of cards are beneficial for spreading the cost of large purchases over a period of time. If you pay the full balance off within the interest-free period, you will not be paying anything extra for the purchases made. If you do not settle the balance before the end of the 0% deal, the interest will be charged at the credit cards headline interest rate which is often very high.

Credit cards for bad credit

What are the bad credit options?

What are the bad credit options?

It can be a struggle to be approved for a credit card if you currently have a poor credit rating, however some credit card providers offer cards specifically for individuals trying to rebuild their credit score. These types of cards often have a very high APR, but if you are careful to pay the balance off every month, you will not pay above the odds. Many credit cards for bad credit will only offer a very low credit amount to begin with, which will increase over time if repayments are kept up.

Cash back credit cards

These types of credit cards allow you to earn money while spending. The more you spend on your credit card, the more cashback you will earn, and this is paid into your credit account either annually or monthly. The standard cashback rate is between 0.25% and 2% of the total amount spent on the credit card.

Reward credit cards

Similar to cash back credit cards, reward credit cards offer their customers points that can be redeemed against goods or services, such as air miles or store points. Some provide reward vouchers that can be spent with a particular retailer.

Secured credit cards

Unlike unsecured credit cards, these types of cards are guaranteed with a deposit or bank account from the applicant. Often the credit limit will depend on the amount of deposit given. These types of cards are usually offered to those with a poor credit rating or individuals who have never had a credit card before as they can be used to build a credit score.

Make sure you know that pros and cons of each card so you can select the right card for your spending needs. Remember that big purchases are best from interest-free credit cards while your usual shopping from your monthly allowance can build up rewards or cash back.

How can you save money using credit cards?

Credit cards are great for building credit ratings and giving you access to funds during an emergency, but if used carefully they can be really great for saving money and reducing your spending. Here are a few steps you can take to save money on credit cards:

1. Get a reward card if you pay your balance monthly

In general, reward cards have higher interest rates than regular credit cards to cover the cost of the rewards offered. If you pay your credit card balance in full every month, a rewards card can be really beneficial as you will pay no interest and still get the extra perks. If you are not in a position to pay off the full balance every month, consider a lower interest card that doesn’t offer as many rewards.

2. Do a careful cost analysis before consolidating debts

It is common to clear one credit card debt with another using balance transfer cards, and this method can save you money if it is carefully considered and calculated first. Balance transfer cards often only offer an interest-free or low APR for a set period of time, and after this, it will increase to a higher rate. They also usually have a balance transfer fee associated with them, which should be carefully considered. Do the maths and work out how much extra you will pay in fees and if you can realistically pay off the debts before the low-interest period ends.

3. Get into good repayment habits

Avoid any extra charges or excess cost by using your credit card sensibly. It is always best to pay off the balance in full, if you cannot afford to do that, always pay more than the minimum requirement as that will save you a fair amount of interest in the long run. Never miss a payment as you will likely receive extra charges for not making the repayments on time.

4. Research, research, research

It is so important to compare credit cards before making a final decision or signing up with a credit card provider. Thoroughly read the terms and conditions and consider your personal spending habits. Different cards are suited to different types of spenders.

5. Don’t rely on your credit card

If you can, always keep an emergency fund somewhere in the background that you can fall back on if needs be. Relying on your credit card for emergency situations can land you in a lot of debt and end up costing you a large sum in interest and fees.

6. Avoid having too many cards

Having a large number of different credit cards will usually encourage you to spend above your means and charge on multiple different cards, which is not only difficult to keep track of but can also result in you overspending more than you can repay. It is often beneficial to use just one reward card to try and collect as many points in one space as possible, using multiple reward cards will leave you with various loyalty points in different areas.

7. Have a spare credit card

Contrary to the above point about not having too many cards, it can also save you some money if you do have more than one. Using a rewards card for everyday items that you know you can pay off every month will help you pay little interest and build loyalty points. Also having a separate low-interest card can be useful for charging more expensive items that you know you cannot pay off straight away, keeping a balance on these cards is much less costly as you will be paying minimal interest.

8. Avoid use credit cards for cash

While it can be convenient to use your credit card for a cash advance, it is never worth the cost. Often you will be charged a fee for getting cash from your credit card, and on top of this, you are charged interest immediately.

9. Keep an eye out for price adjustments

When using a credit card for purchases, you are benefiting from getting the extra security that you would not get from a debit card or cash transaction. One of these benefits is that if a product you have just purchased changes the price after you have bought it, the credit card company may refund you the price difference. This depends on the credit card and provider so look into if this is a bonus on your card. If it is, whenever you make a significant purchase, keep checking the price after you have bought it to see if you can get some cash back.

10. Never buy extended warranties again

Like with price adjustments, credit cards also offer extra protection for the lifetime of your new product. Many credit card providers will cover you in the same way as an extended warranty does but without the additional costs. Check your credit card for any extended warranty benefits, and then be sure to make the most of it in future.

A written budget is one of the best ways to keep your finances on track and help you to reach your saving goals. Before swiping your credit card on a big purchase, ask yourself if it is in the budget. If it is not, then ask yourself whether the purchase is essential. Keeping track of your budget and checking before purchasing can help you to save money.

How to get the best credit card deal

Get the best credit card deal possible

Get the best credit card deal possible

There are hundreds of different credit cards out there to choose from, and it can be overwhelming to try and find the right one for you and your individual spending habits. Start by fully understanding your circumstances and knowing what you want to get from your credit card; do you want low-interest rates or added rewards and benefits?

Once you have a rough idea of what you need from a credit card, make sure you properly understand all the options available to you. Take the time to do some in-depth research on the credit cards available at the moment, as the deals and rates are constantly changing. Make sure you are clear on the different types of cards, advantages and disadvantages of them all, and exactly how you will be spending on the card.

Check your credit score before applying for any credit card. If you have a bad credit score or no credit history at all, try to rectify this the best you can before applying. Consider a credit card that is designed for building credit, they may not have the best interest rates but can help you improve your credit rating so that you can get a better deal on credit cards in the future. Even if your credit score is good, if it can be improved in any way before making a credit card application then this will improve your chances of being offered the cheapest rates. You can run a ‘soft search’ on your credit rating, which will give a good indication of the likeliness of being accepted without affecting your credit score.

Once you know the type of credit card you want and your chances of being accepted, spend some time comparing the credit cards available at the current time. Compare the APR, minimum repayments, rewards and terms and conditions before deciding which credit card is right for you.

Best credit cards for students

There are specific credit cards out there that are designed with students in mind, often they do not offer the best rewards, but they are easier to be approved for on a student income than a regular credit card. Usually, student credit cards have small credit limits, so you cannot get yourself into too much debt, but the APR is generally higher. Many high street banks offer a student credit card; however, some may not be available unless you have had a student account with them for a while.

In 2018, almost all high street banks have a student credit card option, if they are not openly advertised. Some, such as Halifax, require you to go into the branch in person to apply and find out the details. The typical APR of a student credit card is 18.9%, and currently, all major banks require you to have a student bank account with them as well.

The highest credit limit currently available on a student credit card is £1,000 from Halifax or TSB, while other banks limit it to £500 but offer other benefits instead. For example, RBS and NatWest both offer 56 days interest-free on purchases, so if you are careful always to pay off your balance in full, you will not pay any extra interest.

Best credit cards for businesses

Credit cards are used every day for business

Credit cards are used every day for business

Business credit cards usually come with a range of extra benefits, such as cashback, travel insurance, 0% interest on purchases and itemised billing. Business credit cards are issued to a sole trader or limited company instead of a specific individual like with regular credit cards. While they work in the same way as a consumer credit card, they offer different rewards and advantages that are more geared towards businesses.

You can choose how many credit cards you would like to have on any one account, allowing multiple staff members to have their own cards. Business credit card providers will review the businesses credit score on the application, and like with a consumer credit card, the better the credit score, the more likely you are to get a better deal. Some business credit card providers will also check personal credit scores when you apply, so be aware of this before applying for a business credit card.

Like with personal credit cards, there are a lot of various types of business credit cards available, and each has their own benefits and drawbacks. Some cards offer interest-free periods, while others provide rewards and loyalty points. Carefully consider your business needs and decide what is important for your circumstances, and then compare the different cards available.

Currently, in 2018, APR for business credit cards range from 13% with Metro Bank to 34.9% with Capital One. Some cards provide benefits such as no annual fees and free cash withdrawals, and some business credit cards from major banks are only available to existing business account holders. Be sure to thoroughly research what offers are available to you and consider how they will work with your businesses spending habits.

Best credit cards for low income

If you are on a low-income, it is not always easy to be approved for a credit card. However, there are some credit cards out there that are specifically designed for those with a low income. Individuals who are unemployed, self-employed or on a zero-hour contract may struggle to be approved for a regular credit card but using a credit card specifically designed to build credit ratings could be perfect for these situations. They usually offer a low credit limit, allowing you to pay off the credit easily and not get into an unmanageable amount of debt.

Usually, these types of cards require minimum annual earnings of £10,000. However, there are some available for those earning £3,000 or more. In addition to the minimum earning requirement, low-income credit cards will usually have other conditions as well. Lenders will consider how many times you have previously applied for credit and review your credit score.

In 2018, there is a wide range of credit cards currently available for those with low income, for example, Tesco offers a balance transfer card where the minimum earnings threshold is £5,000 per annum. Barclaycard is offering a similar card with minimum earnings of £3,000 per annum and will consider those with poor credit ratings or CCJs.

Best credit cards for high income

Many credit card providers will offer a ‘platinum’ or ‘gold’ card option as well as their regular credit card, and these are aimed to give extra benefits and rewards to those individuals who spend the most. These types of cards usually come with high minimum income requirements and give high credit limits. Many platinum cards offer extra benefits such as insurance coverage and personal concierge services.

If you are looking for a platinum credit card to make the most of your high income and spending habits, carefully research the benefits and features offered with each of the credit cards currently on offer and consider which will be most beneficial to you. Some of the highest end credit cards operate on an invitation-only basis, such as the American Express Centurion Card.

These types of high limit credit cards are not only subject to a high income, but you will also need to have an excellent credit score to prove you can pay back the amount borrowed. Some high-end credit cards will also require you to spend a certain amount on the card every month.

Log into your account and check your spending frequently. Credit card fraud can happen, and it is best spotted early in case it negatively impacts your credit score. Checking account activity not only stops fraud but can identify your spending habits and your significant money leaks.

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