In the UK, Credit Building credit cards have gained popularity in the UK due to the economic down turn. Although the choices are not as many as conventional credit cards, it is still a headache when comparing each type of these cards – for example, all of them have different initial credit limits, different charges interest rates (the APR – Annual Percentage Rate) and cash advances, some cards even throw in a rewards program to attract more customers.
Besides these differences, these Credit Building cards are actually targeting different types of customers – for example, some credit card companies are not interested with people with no credit history at all, while other cards are happy to issue a card even if you are just recently discharged from bankruptcy. Some card companies even resort to dubious business practices like mis-selling their PPI (Payment Protection Insurance) – if you are not careful enough, you will lose lots of money.
Actually, it is not that hard to choose a “poor credit” credit card if you know how – so here are the things that you need to watch:
1) Is the card company regulated by the FSA (Financial Services Authority)?
It is required by British law that all credit card companies need to be registered and regulated by the FSA. You can always give the customer service a call, and ask for the FSA’s registration number.
Although this may sound trivial as most companies are registered, it is still worth the effort to find out – in case you are facing trouble because you are ripped off, you know that you can still file a complaint to the FSA.
2) Are you just discharged from bankruptcy? Do you have any credit history at all?
Some “credit building” credit card companies make it clear that they do not want your business if you are bankrupt during the last 12 months. Besides, some of these companies are only targeting customers with really bad credit. This means, if you are a fresh graduate who just entered the job market, and you have no credit history, they will NOT accept your application as well.
To find out, it is usually just a phone call away – almost all credit cards have their own customer service numbers, you will know whether you stand a chance to be accepted if you apply within minutes if you make that call.
3) How does the “credit building” card help you rebuild your credit history?
In our opinion, giving you access to a credit card is just not enough to rebuild credit. For example, some companies will offer you incentives to help you with credit building, like interest free loan periods for 2 months, and deep discounts on groceries and food.
4) A note about the credit limits
It is completely understandable that you are concerned about the initial credit limits – Because a credit limit that is too low simply makes spending money a major inconvenience. After all, having a credit card is all about the convenience, right?
Well, depending on how the banks evaluate your credit report, they may offer you a very low credit limit, for example, £150. To be frank, a limit £150 is a major nuisance – you need to constantly monitor your expenditures to avoid the over limit fees.
But do not cancel a card just because of the credit limits. Instead, find out if you have an opportunity to increase your credit limits in the future. Some banks will increase your limits every 3 or 4 months if you have a perfect repayment record – it is possible to get up to £3000 credit limits certain cards.
Summary
You now know that you need to find out about 4 aspects of your potential credit card, and they are:
1) Whether the company is regulated by the FSA
2) If you are recently bankrupt, or if you just graduated from college, make a phone call to find out your chances before applying
3) Does the card company help you to make the credit building effort easier?
4) Check if you have the opportunity to increase your credit limits in the near future
Further reading
The Granite credit card is one of the “poor credit” credit cards that consider people with CCJ’s, people who are just discharged from bankruptcy, and of course, people who has no credit history at all. Besides, they also work hard behind the scenes to give you huge discounts on groceries, books, travel packages, food and almost everything under the sun through the Granite Card Rewards Program.
(In fact, at the moment they are the only credit building card that offers a rewards program)
To find whether the Granite card is for you, check out our post on reviewing the Granite VISA card.
