I am fairly young and have only ever had debit cards. What is the benefit of credit cards and does anyone have any recommendations?
They are good for boosting your credit score and history if used correctly. Is there any reason you want one (big purchase etc). I’d advise you to use an eligibility checker on Clearscore/MSE or directly with the company if they have one.
I’m also interested in credit cards for building credit scores. Will probably on spend £5 on it a month, so preferably no fees. Any suggestions?
It really depends on who you are as a person and your personal circumstances.
Some people manage to take advantage of all the 0% deals and points available and others (especially young people) end up with a big stack of debts that go on forever.
I feel as though I’m not a foolish person but I would say that in my couple of decades of being an adult I’ve more often than not fallen into the latter category, making the credit card providers a stack of money.
While you might plan to take advantage of the deals, sometimes life happens and it’s a slippery slope.
If I had my time again I think I’d ban myself from ever getting a credit card. I’d save up a couple of grand and put it in a pot (easy to do if you are fortunate enough to have that stage in life where you’re earning money but still living with parents), then treat that money like a credit card - so paying back more than I borrowed all the time. I’d be rich by now!
Ps. The “building your credit score” thing is a catch 22. You take out credit so that you’re eligible for more credit. Unless you’re planning for a mortgage application very soon then you are unlikely to need the best credit rating or loads of unutilised credit. You’re also at risk of utilising it where you wouldn’t do if it was your own money.
I only use a credit card for travel - Halifax Clarity. It had the benefits of Monzo before Monzo existed. I tend to only use it for large travel purchases like flights nowadays or occasionally for purchases I know will be refunded so it doesn’t mess with my debit balance.
For long-term travel the Clarity is essential as it doesn’t have the £250 restriction on fee-free ATM withdrawals that Monzo has.
The rule with credit cards is to always pay off in full every month. Otherwise you’re going to get into a mess.
The most simplistic view I can think of is…
Are you someone who could 100% say that you wouldn’t overspend, you’d pay it off every month, and you’d be responsible with it?
If so - Get one, and start building your credit history.
If you think you may fall foul of any of those points - Don’t get one, and wait until you think you’ll be able to control everything
In addition to the already-mentioned credit building and spending points/cashback, section 75 protection is a valuable benefit of credit cards
If you are going to have one, I suggest spending a little more on it than that per month otherwise there isn’t much point in having one.
MBNA might be worth a shot to start with. Never get a Credit Card from your main bank (unless said bank is Monzo of course).
If you get a credit card then you can start demonstrating responsibility to lenders. If you pay in full every month, then it lets lenders like your future mortgage provider and other lenders see that you can be responsible with credit and that you are capable of paying back on time. You might have to go for a credit card that charges nearly 40% if you’re new to credit (like Capital One, Barclaycard Initial, or Aqua), but this should go down to way below 20% once you demonstrate responsibility.
Set up a direct debit as soon as you get it to cover the full balance
Also if you can’t pay in full every month, be sure to pay it off before the interest free promotion expires.
I got my first credit card aged about 23, a Nationwide Gold Card actually. I’ve had a few over the years and currently have a Tesco card, but I’m lucky that I usually get the low rate cards.
This shouldn’t really come in to it. If you don’t have the money, don’t spend it. Put it aside in a locked pot whenever you use the credit card.
Well to some extent, you’re right. But a credit card could also be used for big purchases or emergency spending. I suppose arguably you should also have savings to prepare for events such as these.
Depends on your reasons really. I’m using my credit card to start to build my credit score but only pay for fuel with it and then pay it off in full. Once my credit score has risen and I’ve got a decent profile, i’ll more than likely stop using it
Although that may then see your credit score fall if you stop using your card regularly.
This isn’t accurate in my experience. I often forget to spend anything at all on my credit card, but it (plus phone direct debit, being on electoral role, overdraft available, etc) keep my Experian score high. I keep it as an emergency card, and if buying plane tickets etc.
To both @DipperDolphin and @don_quixote - I would recommend setting up a direct debit to pay it off in full each month, that way even if you forget to do it yourself you’re in no risk of missed payment fees.
Well no there is a specific reason I want one. I am aware of credit scores a bit and am leaving uni next year so will potential needs loans in the future and want to be in the best postion
A broad perspective of views in this thread @don_quixote - pretty much covers the key stuff that matters.
I’ve used American Express as my main card for the past 3 years, I move money into a pot as soon as I spend on it, and then pay it off with that pot at the end of the month. I’ve managed to fly first class to India twice with the points I accrued. Definitely worth it…