Bank credit cards
Credit cards can be bamboozling – there’s almost too much choice. So, here’s the lowdown on bank credit cards and what they have to offer.
What is a bank credit card?
It’s a credit card issued by a bank and, like any other credit card, you’ll have to apply for it. If your application is successful then, as with other types of credit card, you can use it to buy things but pay back the cost at a later date.
How does a credit card work?
Your credit card will come with a limit on how much you can spend – what that limit is will depend on your circumstances and the agreement you have with the card issuer. You can spend up to the limit on your card, but go beyond it and you could face charges, have your spend limit decreased and, in some cases, your card account could be closed.
You’ll be sent a bill every month detailing everything you’ve bought using your card. You can pay off your bill in full, or you can choose to pay a minimum amount. However, only paying the minimum will mean that you may incur interest and ultimately pay more for what you’ve bought.
How do I choose a credit card?
There’s no one size fits all when it comes to a credit card, and what works for you will depend on your spending habits and whether you’re looking for any extra benefits. For example, some cards will offer rewards, such as cashback, based on the amount you spend, while others might promote a long-term low interest rate, or charge no interest at all for new purchases (this is usually for a limited or introductory period only).
A good way to compare credit cards is by the APR (annual percentage rate). By law, all credit card companies must advertise this figure and it shows the total amount your borrowing will cost you, including any fees charged by the card issuer (such as an annual fee). So, if you spend £1,000 on your credit card and the APR of the card is 18%, you’ll pay an additional £180 in interest, making your total debt £1,180. Of course, if you pay off the full amount you owe each month, you shouldn’t incur any interest at all.
Why should I get a credit card from my bank?
One of the main reasons you might decide to opt for a bank credit card is ease of use. If you bank online or use a banking app, then you should be able to manage all your accounts and your credit card in one place, meaning you can always stay on top of your finances.
Also, some bank-issued credit cards with annual fees will have those fees waived for a certain period, or entirely, if you also hold an account with same bank.
Ultimately, you should choose a credit card that will benefit you the most. If your bank is offering you a credit card with perks and rewards that you think are worthwhile, then go for it. Otherwise, it can be more rewarding to compare what else is on offer before making the assumption that your bank will give you the best credit card deal available.
What are the pros and cons of a credit card?
Credit cards let you buy things without paying for them immediately – which can be very handy if you need something but don’t have the money at the time. As long as you pay off your bill in full, then you won’t pay any more than the original cost.
Even if you don’t envisage using your credit card for everyday use, it can be useful if you’re buying more expensive items or booking things online. That’s because under Section 75 of the Consumer Credit Act, credit card companies are jointly responsible (along with the retailer) should anything you buy not arrive, is faulty, or the company you’ve bought from goes bust.
However, credit cards can be expensive if you decide not to pay off the bill in full every month. As each month’s interest racks up, it can become costly and debts can spiral out of control if you’re not careful.
What happens if my credit card application is rejected?
You can’t assume that your bank will give you a credit card just because you have an account with them. Credit is usually ‘subject to status’ and your application will have to go through a credit check.
If your credit history is good, then your application for credit is likely to be approved. But, if your credit score isn’t so great, then you might find getting credit difficult.
If that’s the case, don’t keep applying for more credit because every time you do so it will show up on your credit history. Lots of applications and rejections can serve as a red flag to lenders that you’re struggling to get approval.
If you’re rejected and you’re not sure why, you should check that the information held on your credit report is correct – it could be that something as simple as a wrong address is preventing your application from being approved.
Alternatively, you can apply for a credit building card, which starts off with a lower spend limit (usually between £100 and £1,500). This type of card is aimed at anyone with a poor credit rating, either because of previous financial problems or because they have no history of borrowing. In most cases, the spend limit on these cards will be raised incrementally, based on how you manage your card.
How can I find a credit card deal that’s right for me?
That’s where we can help. We’ve teamed up with Lovemoney Financial Services Ltd to make it easy to filter available cards by credit card type, and highlight the key features of each one. We’ll even show you cards in ascending order of APR so you can see the most competitive rates at a glance (but look out for any added extras, such as annual fees). So, why not start comparing today.