There’s no doubt that credit cards are a convenient means of payment when you have unexpected bills but are short of cash, or as a way to shop online. A major advantage of credit cards is that apart from the security measures put in place by the card issuer, you’re also protected by Section 75 of the Consumer Credit Act for any purchases costing £100-£30,000. In this article we look at:
- How credit cards work
- How you can apply for a credit card
- Getting a credit card with bad credit
- Withdrawing cash with credit cards
How do credit cards work?
When you spend money on a credit card, you’re in fact using a loan facility, with a spending limit set by the card provider. You have an interest-free period (usually 20-55 days) when you aren’t charged for your borrowing. You must make the minimum payment on time, or you’ll be charged penalty fees for late or missed payments.
After your payment date, you’re charged for any outstanding balance according to the APR offered by your card provider. You are sent a statement every month so you can keep track of your spending and repayments.
How can I apply for a credit card?
You can apply for a credit card in-branch, online, by post or by phone. Before you do so, you should research the market to see what type of credit card you need: 0% purchase cards, 0% balance transfer cards, etc. All have their pros and cons so you should read their terms and conditions carefully, especially any limitations on introductory offers and the availability of extra benefits like cashback and rewards.
Using an online comparison site is a useful start because many allow you to check whether you fit the card issuer’s eligibility criteria. In this way, you have a greater chance of being accepted. Once you have chosen the right credit card for your circumstances, you fill in an application form with personal details and information about your income and financial history. Before you’re accepted, the credit card provider will carry out a credit check.
Credit card questions:
To apply for a credit card in the UK, you must be a resident with a UK bank account. To be able to apply for a credit card, you must have a fixed address. Once you have supplied all required personal information to the lender or credit card provider, you will be subject to a credit check when applying for a loan or a credit card.
Most credit card providers may take between 5 to 10 working days to process your application and decide whether to approve you for a credit card. Applying by post can lead to longer waiting times, however most credit card providers can process your application on the same day when this is submitted online. Provided that you have supplied all required personal information accurately, you would then be subjected to credit checks. Once the processing of your application is complete, you would normally know if you have been approved on the same day.
If you choose to apply online for a credit card, it is very likely that the credit card provider can inform you on the same day if you have been approved. However, very few companies will allow you to start using the issued credit card immediately after approval. Generally, it is not possible to receive your credit card on the same day that you are approved. A waiting time of approximately 3-5 working days applies for the newly issued credit card to be sent to you.
Can I get a credit card with bad credit?
There are special credit builder cards for people with a low credit rating because of little/no credit history, or because of a history of poor money management. Credit card issuers use risk-based pricing. This means the higher the risk you represent as a borrower (according to your financial history and/or credit score), the higher your interest rate.
There are special credit builder cards for people with a low credit rating because of little or no credit history.
Credit builder cards often have higher charges and lower spending limits. However, they’re an ideal way to build up your credit score if used wisely, and as long as you spend small amounts and repay the outstanding balance in full every month.
Can you withdraw cash with credit cards?
It is possible to withdraw cash from an ATM by credit card. However, it should be avoided. Not only do these cash advances cost you more in extra fees, but you’re charged interest from the date the money is withdrawn. Cash advances will also be noted on your credit file and give the impression that you have poor money management skills which can affect your future access to other credit facilities.