Best UK Credit Card Tips for Beginners | Cash Back. Travel. Credit Repair.
Stuck about credit cards? Should get one, should you not? Whats the best one for you? This blog might just help you out.
You may have been told to only buy something when you’ve saved up the money and you’ve got the cash in your hand to give to the seller… right? WRONG! Well partly wrong…
You should only buy things that you can afford, yes. I believe the method you should use to actually pay for something though in most cases should be a credit card. Why? If managed properly, a credit card is one of the most effective tools in improving your credit report and credit score.
Having a good credit report these days can affect more than just mortgages but also any monthly bills such as utilities, phones, car insurance and bank accounts and also what interest rate you pay/terms you get.
With credit cards you will also get better payment protection on purchases (which I’ll get into) and be able to make money from your purchases (I’ll explain how to do that too!)
In this blog I’ll cover the most important things you need to know about credit cards. I will also discuss different credit cards for different purposes and which ones could be the best for you!
Things you need to know:
- Making your credit report look good is like choosing a photo for your Tinder profile; you want to make sure you’re as attractive as possible. Not like you’ve just rolled out of bed with half of last night’s kebab stuck to the side of your face.
- Credit card companies make judgments on future behaviour based on past behaviour. This is why you need a credit history. It is important to manage your credit cards well by paying off any purchases you make monthly, this will keep your credit card history as attractive as that tinder profile!
Once you have a credit card you need to manage it by:
- Always making payments on time.
- Always staying within your credit limit.
- Avoiding withdrawing cash.
- Golden rule… Paying off IN FULL every month.
Doing the above will help your credit score and make you more attractive to lenders. If you don’t follow these points, you will start to gain interest charges on your account, which no one wants! If you are good risk to the banks, it is more likely you’ll get the advertised interest rate, or qualify for that 0% balance transfer for the full period advertised. These are often advertised at 18 months or 24 months, but those periods of time are only reserved for people who have the best credit scores.
Also just because you have seen a personal loan offer with a 6% headline rate, that doesn’t mean you will get it. That rate is reserved for the people with the best credit score, so you need to make sure you are one of those people!
Purchase Protection on Credit Cards.
Another important aspect is the purchase protection credit cards provide. If you make purchase of between £100 – £30,000, you’re covered under Section 75 of Consumer Credit Act. This means the credit card company has joint liability with the seller if there is a problem with what you bought, or the seller goes bust. Basically, you can get your money back if things go wrong.
You don’t get same protection on debit cards, and this is why I always say that credit cards are better for purchases, especially larger ones. Even if you have the money available in your bank account (which of course you should do!) pay with your credit card, then pay the balance of your credit card off straight away. This way you will get the protection for no extra cost.
It even applies even if you pay a small amount of total purchase price on credit card, as long as the total cost is between £100 – £30,000. Say you were buying something for £300; if you put a deposit down for £30 on the credit card and pay for the rest of the purchase with another method, you would still be protected for the whole transaction amount.
Other general best credit card practice tips:
Now this may be an obvious one; Use your card! There is often bit of confusion over whether unused credit is good or bad for your credit report. Lenders look at credit utilisation. (low % good), but they don’t necessarily view lots of unused credit lines as a good thing. My general suggestion is to only keep cards you use, spend on them regularly, and pay them off fully.
Being rejected for credit is not always a bad thing, it just might mean you don’t meet the profitability criteria…
If a credit provider looks at your file and sees that you pay everything on time every month, quite simple, they’re not going to make money off of you! This may just mean that you’re not the type of customer they are seeking.
Which are best credit cards?
It does depend on the purpose of course, but here are which ones I think are some of the best cards for some different needs and circumstances (correct at December 31 2020):
If it is rewards you are going for, which is what I tend to use mine for, this is generally this best:
- Generally considered best cash back credit card.
- 2 options (Fee free = 0.5% up to £5k, 1% above / £25 fee = 1% up to £10k, 1.25% above).
- Both offer 5% cash back in first 3 months.
- Spend EVERYTHING on card for best value. Every time you spend money on the credit card and pay it off, the percentage reward is paid back to you. The money you earn can be invested and could be worth THOUSANDS in future. So for example, when you buy your food shop, pay with your credit card. Then hop onto your mobile banking straight away to pay off the transaction. Invest those rewards to grow your money. CLICK HERE TO SEE MY RECENT YOUTUBE VIDEO ON THIS.
- The only thing to keep in mind with AMEX is that it is not accepted everywhere in the UK.
Back up – Amazon Mastercard (points exchanged for Amazon vouchers), Lloyds Avios Mastercard (Avios points for flights or other retailers.
When travelling, most cards charge non-sterling transaction fees (can be up to 3%). Which means when you spend, you get charged for the transaction. If you travel a lot, it is worth having a specific card so this doesn’t happen.
- No fees or interest on overseas spending as long as repaid in full every month
- 25% cash back on purchases. It isn’t huge but it’s definitely better than nothing.
These cards are designed for students who generally don’t earn anything (or very little) while they are doing their studies.
- Most are offered by banks where the student already has a student account open.
- Usually low credit limits (£500 – £1000)
- HSBC, Natwest, RBS, TSB all offer options
Credit score repair:
These cards are designed for people with poor credit scores to help them repair it. There are a few of these to choose from, but my pick of the bunch is Amazon Classic. This offers:
- 3 months 0% interest on purchases
- £20 Amazon voucher on acceptance
- Specifically designed for poor credit files.
I hope this blog has helped. If you have any more specific questions, please do not hesitate to get in touch. If there are any other topics you would like me to cover, let me know and I will see what I can do! To see other blog posts click here. If you would prefer the video to this or to see other videos relating to this, please head over to my YouTube channel and click subscribe!