Applying For Your First Credit Card

From our research (July 2022), we ranked the top first credit cards by the following factors:

• Interest rate: the representative APR you’ll be charged
• Credit limit: the amount you’ll be able to ‘borrow’ on the card to fund your spending, according to your circumstances
• Perks: any incentives or benefits attached to the card, whether upfront or ongoing

A few points to note:

• There is a good chance the APR you see advertised will not be the one you are offered. Advertised APRs are ‘representative’ which means they must only apply to 51% of successful applicants
• You may need to demonstrate a certain level of income per annum to qualify
• APRs are higher than on standard credit cards because customers are perceived to be higher risk

To get accepted for a credit card, you’ll usually need to be aged 18 or over, although in some cases you may need to be older.

You will also typically need to live in the UK, be in employment (although there are cards designed for students – see below) and, for certain credit cards, you’ll need to earn over a certain amount each year.

To qualify for the most competitive credit cards, you’ll also need an excellent credit score. However, if you’ve never borrowed before, it’s unlikely you’ll have much of a credit history if you have on at all, and your credit score may be low as a result.

Before you even think about applying for a credit card, it’s therefore worth checking your credit score using an online service.

Having access to your credit report will help you understand how likely you are to be accepted for a credit card, and many of these services will also offer tips on what you can do to improve your score. This could include:

• making sure you are registered on the electoral roll (this provides proof of address)
• getting your name on bills such as a mobile phone contract or energy bill (these are classed as a form of credit)
• paying bills on time
• correcting any mistakes on your report
• opening a bank account (this can show you are financially responsible).

If your credit score is low, it’s worth making a few of these changes and then waiting a few months to see if your credit score improves.

The next step is to think about the type of credit card that’s right for you.

If you’re a student, a student credit card is probably your best bet. This type of card is designed for those in further education who have yet to build up a sizeable credit history and won’t qualify for mainstream credit cards.

Credit limits are typically lower than standard cards – usually around £500 to £1,500 – and interest rates are higher, so it’s important to make sure you clear your balance each month.

On the other hand, if you’re about to start working life and you don’t have much of a credit history, you may want to consider a credit builder credit card. This type of card is designed to help you improve your credit score over time, and again credit limits are usually lower than standard credit cards and interest rates are higher.

Once you’ve started to build up a credit history and your credit score has increased, you may then be able to apply for more competitive credit cards.

Some of the options to consider include:

0% purchase credit card – allows you to spread the cost of your spending over several months interest-free. Just remember that interest will kick in once the 0% deal ends.

0% balance transfer credit card – allows you to transfer existing credit card or store card debt across and avoid paying interest for a number of months. There is usually a transfer fee to pay (often around 3% of the balance) and interest will be charged after the 0% deal ends.

0% money transfer credit card – allows you to move cash from your credit card into your bank account and you then repay it in the same way as a normal credit card balance. You can use the money to pay for whatever you wish, although a popular option is to pay off overdraft or loan debt. Again, there will usually be a transfer fee to pay and you’ll need to clear the balance before the 0% offer ends to avoid paying interest.

Low APR credit card  – some credit cards offer a low rate of interest for life, rather than an interest-free period, so you won’t need to have cleared your debt within a specific timeframe. You can often use these cards for both purchases and balance transfers.

Overseas credit card – this type of card is ideal if you regularly travel abroad as you won’t be charged foreign transaction fees. Some cards also allow you to avoid paying a fee for cash withdrawals, but you will still be charged interest from the moment you receive your money – even if you pay off your balance in full that month.

Rewards credit card – some credit cards offer rewards such as airmiles or loyalty points at certain retailers or supermarkets, while others offer cashback. This type of card is usually best if you can afford to pay off your balance in full each month as they often charge high rates of interest.

Once you’ve made your decision, it’s time to apply.

When comparing credit cards or making your application, you’ll need to provide the following information:

• your name and address
• your date of birth
• your nationality
• your employment status
• your salary/income.

You may also be given the option of using an eligibility checker. Eligibility checkers run a ‘soft’ search on your credit file to estimate the chances of you being accepted for a particular card. Because it’s a soft search, it won’t leave a mark on your credit file for other lenders to see.

If there are a lot of ‘hard’ searches recorded on your file in a short space of time, lenders may see this as a sign that you are struggling to persuade any card company to offer you a deal, which they would view negatively.

Running an eligibility check also means you won’t keep applying for cards you’re unlikely to be accepted for.

Many card providers offer instant approval when you apply online, while others will take around five to 10 days to make a decision.

Once your application has been accepted, you should receive your credit card within 10 working days. You’ll then need to activate your card (usually by phoning an automated number) and, once you’ve received your PIN, your card will be ready for use.

Should you change your mind, you’ll have a 14-day cooling-off period in which you can let the card provider know that you want to cancel the agreement. If you’ve already used the card, you’ll have 30 days to repay the outstanding balance.

If your application for a credit card is turned down, resist the temptation to apply for another one straight away.

Each time you apply for a credit card, it leaves a ‘footprint’ on your credit report and if you make several applications in a short space of time, it can make you look desperate for credit. Ideally, it’s best to space out applications by at least three months, or six months if you can.

If your credit card application is accepted, it’s important to use your new card carefully to ensure you don’t end up building up a lot of debt you can’t afford to pay back. Here are some top tips to help you:

Always try to clear your balance before any 0% deal ends To do this, work out how much you will need to pay each month. For example, if you had a balance of £2,000 on a card offering 0% for 20 months, you’d need to pay back £100 a month to clear it before the 0% deal ends.

Only ever spend what you know you can afford to pay back Don’t be too swayed by rewards and other incentives that can encourage you to spend more than you need to.

Always check the annual percentage rate (APR) of the card This includes the amount you will be charged once any 0% offer has finished. Be aware that if the APR is ‘representative’, it only has to be offered to 51% of those who make successful applications for the card. The remaining 49% are likely to be offered a higher rate.

Make sure you’re aware of any fees There may be fees for missed payments, balance transfers, money transfers, using your card abroad, or cash withdrawals. Which leads on to…

Avoid using your card for cash withdrawals… unless it’s an emergency. Not only will you pay a fee of around 3% of the amount withdrawn, you’ll pay interest from the day of the withdrawal – even if you pay off your balance in full that month.

Check the credit limit Always do your best to stay within your credit limit as going over it can result in penalties such as a fee, a reduced credit limit, losing any 0% offer you’ve taken advantage of, and a mark on your credit score. If you regularly keep up with your repayments, your provider may choose to increase your credit limit after a number of months.

Always pay on time Setting up a monthly direct debit is an easy way to make sure you remember to pay on time each month.

Pay off more than the minimum if you can Minimum monthly repayments are set at exceptionally low levels but paying off more than this each month will ensure you pay off your balance faster and reduce the amount of interest you pay overall.