How to Apply for a Credit Card in the UK

How to Apply for a Credit Card in the UK

How to Apply for a Credit Card in the UK

The amount of information available through internet searches or comparison websites means that consumers are more empowered than ever before.

If you want to take control of your finances and apply for a credit card, or even if you have not yet decided if this is definitely the right move for you, read on to discover the benefits that come along with paying by plastic, as well as the potential pitfalls to avoid.

What Is a Credit Card?

A credit card is a small, plastic card that fits in your wallet and looks similar to a bank card.

It allows you to purchase items or to pay for services on credit (to be paid back at a later date).

Credit cards are widely accepted in both physical locations and online.

Who Can Get a Credit Card?

You must be over the age of 18, a resident in the UK and able to meet certain conditions to be accepted for a credit card in the UK.

Why Use a Credit Card?

Credit cards are fast becoming the preferred way to purchase items. There are many reasons people are prioritising plastic over cash, including:

Building a Credit Score

If you have no credit rating or want a better credit score, responsible credit card use will help with this.

Information is collected by various companies, which makes up your credit history. This is important for your future if you want to get a mortgage, loan or hire purchase items.

How you use your debit card is not reflected in your credit score, so if you are trying to build up or improve your credit score, you may want to consider applying for a credit card.

Financial Freedom

Your credit card gives you financial freedom. They are widely accepted across the globe and, in some instances (for example, checking into a hotel), they are a requirement.

Credit cards can also be quickly and easily linked to your PayPal account.

Using PayPal can provide additional safety and security for online purchases and is a very simple way to pay for items online and transfer funds.

Safety

Credit cards add extra levels of security and fraud protection for consumers.

Under Section 75 of the Consumer Credit Act, goods and services between £100 and £30,000 are protected if they are bought using a credit card and there is a problem.

This can include protection if the vendor fails to provide the goods you paid for, sends substandard items, misrepresents the sale or, in some cases, if the company goes bankrupt.

Carrying a credit card is also easier and safer than carrying large amounts of cash around. This can be especially useful when travelling abroad.

How Is a Credit Card Different From a Debit Card?

Debit cards are linked to your bank account and will allow you to withdraw or spend money based on the funds you have available.

Aside from a planned overdraft, debit cards do not allow you to spend more money than you have in your account.

The money you spend will usually be taken from your account immediately, or within a few hours, depending on the transaction.

Credit cards allow you to essentially 'borrow' money from your card issuer, to be paid back at a later date.

The amount of money you have available is based on your credit limit and doesn’t reflect the actual funds you have in the bank.

You also have to make the effort to pay the balance off on your credit card, whereas transactions involving debit cards will automatically take funds from your available bank balance.

It is also worth noting that if your debit card is stolen, you are left immediately vulnerable to theft and fraud. If your credit card is stolen, cardholders have increased access to adequate fraud protection.

Understanding Credit Cards

It is easy to get yourself lost in the technical language of credit cards. Here are some of the key terms you need to understand:

APR and Representative APR

Annual Percentage Rate (or APR) is an important consideration when deciding on a credit card.

This reflects the actual cost of the credit (calculated over a year) and includes interest and fees.

Credit card companies can advertise cards with their ‘representative APR’ but this figure only has to reflect the rate that at least half of all applicants will receive.

The APR you are offered may vary from the advertised rate based on your personal credit score or income.

Introductory Offers

These are incentives that companies offer to new cardholders to tempt them to sign up; for example, 0% interest on purchases for a specified amount of time.

Keep in mind that these offers are only temporary. Choose a card that not only has attractive introductory offers but is also suitable for you in the long term.

Minimum Repayment

This is the minimum you must pay back each month on any credit card that has a balance above zero.

Making only the minimum repayment will mean that it takes longer to clear the balance and costs more in the long run due to interest charges.

However, if you are unable to clear the balance in full, you must make at least the minimum repayment by the due date – this will all be outlined on your monthly statement.

How to Apply for a Credit Card in the UK
How to Apply for a Credit Card in the UK

Credit Limit

This is the maximum amount of money you have to spend on your credit card.

Once you have shown you are able to keep up with your repayments over some time, most credit card companies will increase your credit limit either automatically or at your request.

You must not exceed your credit limit, so choose a card that has a sensible limit that reflects your personal circumstances.

Fees and Charges

Some cards will charge an annual fee to use them and some charge an opening fee when you first get the card.

You also need to keep in mind any fees you may incur from exceeding your credit limit, missing a payment or making a late repayment.

Charges vary for withdrawing cash using a credit card or using them abroad, so it is important to check these details first before getting any unexpected, additional charges.

Rewards

Some credit cards offer incentives like air miles, discounts or points to use at certain retailers.

Interest-Free Days

The terms and conditions on your credit card will confirm how many ‘interest-free days’ you will be given after making a purchase.

This is usually up to 56 days, but will depend on how close you were to your payment date when the purchase was made.

This means that if you pay your balance off in full by the due date you will not be charged any extra.

Balance Transfers

Balance transfer credit cards allow you to transfer the balance from one card onto another.

This is especially helpful if you have a debt owing on a high-interest card.

By transferring the balance onto a lower interest card, you will be able to pay it off faster and pay less interest overall.

Where to Look for a Credit Card

Price comparison websites can be a useful tool to look for a credit card. They provide lists of search results that can help you quickly and easily decide which one is best for you.

A basic internet search will also show results for some of the most popular credit cards around. You can also check the website of the bank where you have your current account as they sometimes offer special deals to existing customers.

Which Card Is Right for You?

You are probably familiar with the big-name credit card companies out there, but you may not know that there are different types of credit card and some may be more suitable for your needs than others.

Do you already have a good credit score and are confident you can pay off your balance each month? Are you a jet-setter or a shopaholic who loves to get money off their purchases?

If so, you may want to consider a reward card or cashback card.

As you spend, these cards give back to you in cashback, points, discounts or air miles – ideal for frequent flyers or those who love to shop.

If you have a balance you are struggling to pay off, a balance transfer card could help.

These cards offer 0% interest for an initial period and are ideal for those who need a helping hand to get out of small amounts of existing credit card debt.

Similarly, if you have an overdraft you wish to clear, you should consider a money transfer credit card.

This allows you to borrow small amounts of cash for a set fee, but keep in mind essentially you will be moving your debt from one place to another, although this may clear it quicker and result in you paying less overall.

Are you looking to make a large purchase such as a holiday or a new kitchen? A 0% purchase card can help with this as it helps you to spread the cost by offering an interest-free period.

You will have to make at least the minimum payments on time each month or risk losing the promotion. You can also get a combined purchase and balance transfer card.

There are travel card options for travellers wishing to use a credit card abroad without the large fees usually associated with this, and specialist cards for students, as well as credit builder options for those who are deemed high risk.

If you look around, there are options to fit most circumstances.

What Factors Affect Eligibility?

You may struggle to be accepted for a credit card if you have no credit history or a bad credit history.

There are options out there and it may be a case of starting with a low credit limit or having to go through your bank to get your first credit card, as they will be able to assess if you are using your current account responsibly.

A stable income and a stable address will also give you a higher chance of acceptance.

If you are on the electoral roll it is easy to check your address history.

Existing bad debt, a county court judgment (CCJ) or former bankruptcy can also affect your eligibility, and lenders will view you as a higher risk candidate for credit.

Your Credit Report

This is a record of your credit history including any debts, CCJs, accounts, loan agreements, etc.

Companies check an applicant’s credit history to decide if they feel you are a reliable candidate for credit.

It is possible to fail a credit check even if you do not have bad credit, if your identity, residency or address are not verifiable.

Your Income

Being unemployed or not having a fixed income may hinder your ability to be accepted for a credit card.

Most credit card companies will require applicants to meet a minimum earnings threshold.

There are so many options out there, so whether you are on a low income, employed, self-employed or even on a zero hours contract, there could be a suitable credit card option available to you.

Age

Credit cards are only available to those who are 18 years old and over.

Legally, anyone under this age cannot enter into any kind of credit agreement. This includes credit cards, loans or hire agreements.

You will also need to be able to prove that you are a resident in the UK to apply.

Where Do You Apply?

The easiest way to apply for a new credit card is usually online. This is often also the way to get the best deal.

You will need to have your personal details to hand to fill in an application form.

Alternatively, some providers still provide a paper application that you can send in the post.

You may also be able to apply by phone or enquire in person at your bank. Bank tellers routinely offer loyal customers the chance to apply for a credit card during over-the-counter transactions and they will be able to advise you on where to apply and walk you through the process.

What to Do if Your Application Is Declined?

As mentioned above, all credit card providers will perform a search on an applicant’s credit history.

They will also conduct rudimentary address, identity and age checks.

If your application is declined, you may wish to obtain a copy of your credit file. This will give you a clearer picture of why your application was not successful.

You may wish to apply elsewhere, take time to consider other options or decide if perhaps a credit card is not right for you at this moment.

Remember that credit builder cards often accept those with a lower credit score.

Key Considerations When Applying for a Credit Card

The key factor to consider is always whether you can afford the repayments or not.

If you are going to be tempted to spend more than you can realistically repay, you need to think hard about whether a credit card is right for you and select one with a sensible limit.

Making many consecutive applications for credit can actually harm your credit score. You may wish to check your eligibility before making an application.

There are many credit brokers such as Experian that can assist you with this, to avoid you getting rejected on the grounds of eligibility.

How organised are you as a person? Payments need to be made on or before the due date – are you likely to be able to keep up with this?

If not, setting up a direct debit from your bank account would be the ideal way to pay as the money would be taken automatically each month. You would need to ensure you had sufficient funds available to make the payment.

To make regular purchases and repayments, you need a stable income. Only you know your personal circumstances and whether you have regular income and a good support network around you if you ran into trouble with your repayments.

Study the terms and conditions carefully to understand exactly the agreement you are getting into with the credit card company. Once you have your card, check your statements carefully to ensure all transactions are genuine and that you understand the interest rate, due date and minimum payment.

If you have the funds available, paying your balance off in full each month by the due date will negate any additional charges.

Some credit card companies take time to process payments (up to two working days) so don’t leave payments until the last minute.

Withdrawing cash will incur substantial charges on a credit card, so use a debit card for this purpose instead.

How to Apply

If you have decided that a credit card is right for you, making an application is easy:

  • Be on the electoral roll (this makes your address history clear).

  • Check your credit history and if you see any mistakes, report these to the relevant lender to rectify or to the credit reference agency that has provided your data.

  • Use comparison websites and eligibility checkers online. This will help you to determine what is right for you and also negate you making simultaneous applications which can affect your credit score.

  • Have your personal details and any identity documentation to hand. Fill out any forms accurately and honestly.

  • Read and understand exactly what is being offered. Research any phrases you do not understand and pay attention to the terms and conditions the credit card company are offering as you do not want to incur surprise fees or charges.

Final Thoughts

Credit cards play a key role in modern consumerism. Only you know your personal circumstances and whether or not applying for a credit card is the right move for you.

They can offer freedom and added security online, especially for big purchases and helping young people to build their credit score.

With such a wide variety of options out there, it should be easy to find one that suits you.

If used responsibly, your new credit card offers choice, freedom and can provide a fundamental step towards you improving your finances.

WikiJob does not provide tax, investment or financial services and advice. The information provided is for general reference and you should not rely on it to make (or refrain from making) any financial decisions. Personal situations will vary. Always seek independent financial advice when choosing how to manage your finances.


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