This year has seen many things, the Diamond Jubilee, London Olympics and Obama re-election but for me, it has also meant taking my first steps into the credit card market.
I decided to take a big step into the adult world in 2019 by applying for my first credit card. At the age of 23 I felt it was the right time to start building up my credit score.
Having a decent credit rating is essential for getting credit later on, whether this is a mortgage or car finance deal. The better your rating is, the more likely you are to be accepted for credit and the better the deal you are likely to receive.
Taking out a credit card means I can take on debt but swiftly pay it back. This shows my bank I’m a reliable borrower. And it’s this that goes on my credit record.
No credit score, which card?
For me it was an easy choice. Despite having no credit history I’m a lifelong Halifax customer, therefore the bank was always going to be my first port of call.
Although I often say loyalty doesn’t pay, if you have a limited or no credit history, this rule doesn’t apply. You’re actually much better off going to your current bank before going elsewhere as you’re more likely to be accepted because your bank already knows you.
Spend some time going through your options – there’s little point opting for a market-leading card if you’ve got no history of borrowing. But see what your bank can offer you. In my case, I was offered the Halifax Clarity Credit Card.
Not only was this a realistic card for me but it also offers fee-free foreign transactions and withdrawals. This year I’ve managed to get away for a few holidays and the Clarity card has really saved me some cash. Most credit card providers charge up to 3% on foreign transactions so you can see how regular travellers can really benefit.
Despite this, I still get charged 12.9% interest on what I spend so it’s important to pay everything off in full each month to avoid this. However, with cash withdrawals, the interest is charged from the day the withdrawal is made, so these are best avoided all together.
If your bank won’t offer you a credit card, another option is to go down the credit builder route. These cards tend to have high interest rates but they are specifically designed to help those who need to build up their credit rating. Just be sure to clear the balance in full each month so you don’t pay interest.
Paying your bills
Like many people, I’ve found spending on my credit card very easy! Especially as it’s armed with contactless technology so I can pay for items in a matter of seconds.
So I have set up a direct debit to clear the balance in full each month. However, after setting it up, I then struggled to change the date of payment given to me by Halifax. This has proved an issue as I find the money is taken from my current account a week before payday. I want to pay the debt off on the day I receive my wages – but apparently this isn’t possible. Annoyingly, I’ve had no problem arranging this for the monthly payment of rent, mobile phone or gym.
Has it benefitted me?
The risk of using a credit card is that you can rack up a lot of debt. But providing you use it sensibly, a credit card is definitely a must-have in your wallet.
One thing I’ve found in my first 12 months as a cardholder is that a credit card can be your friend but can just as easily stab you in the back if some self-restraint isn’t enforced.
You should therefore ensure you’re not relying it on for every day spending, but it can come in very useful – particularly when ordering goods online or booking holidays. That’s because under Section 75 of the Consumer Credit Act, all purchases over £100 are protected should they not turn up or not match up to what you had originally ordered.
And on top of this, I know I am building up my credit rating and helping to prepare for my future.