At the moment, the Barclaycard Forward is one of the best credit-building credit cards as it reduces interest for responsible borrowing. If you need to build your credit rating, a credit card is a powerful weapon. The best options will boost your rating while exposing you to the minimum risk in terms of credit limits. However, the flip side is these cards attract a higher representative APR.
| Purchase Credit Card | Purchase Rate (APR) | 0% Purchase Period | Annual Fee | Representative APR |
|---|---|---|---|---|
| Barclaycard Platinum Purchase Card | 24.9% | 21 months | £0 | 24.9% variable |
| Sainsbury's Dual Offer Credit Card | 21.9% | 22 months | £0 | 21.9% variable |
| TSB Advance Purchase Card | 21.9% | 20 months | £0 | 21.9% variable |
| Virgin Money 0% Purchase Card | 24.9% | 23 months | £0 | 24.9% variable |
| Tesco Bank All Round Credit Card | 22.9% | 18 months | £0 | 22.9% variable |
What are credit builder credit cards?
Credit builder cards are aimed at people with low or no credit history. They have low starting credit limits and higher APRs. The main purpose is to show lenders you can borrow and repay responsibly, which gradually improves your credit score.
Use credit builder cards a good for small, manageable purchases. Always repay in full each month to avoid interest. Set up direct debits to ensure you never miss a payment. Over time, responsible usage can help you qualify for better credit products.
To keep your costs down you should pay off your balance in full each month. Avoid using the full limit. Don’t withdraw cash (interest is charged immediately). Use it regularly, but responsibly. Monitor your credit score and review offers for better terms as your rating improves.
Pros
- Improve credit score over time
- Accepted in most places
- Help establish credit history
Cons
- Very high interest rates
- Low credit limits
- Can damage score if misused
✅ Is a Credit-Building Credit Card a Good Idea?
Yes, when used responsibly, a credit-building credit card can be beneficial. By making small purchases and repaying the full balance on time each month, you can showcase your reliability to lenders, which may improve your credit score over time. This improved credit profile can lead to better access to financial products and more favourable terms in the future.
Obtaining a credit-building credit card can be a prudent step for individuals in the UK aiming to establish or enhance their credit history. These cards are specifically designed for those with limited or poor credit backgrounds, offering an opportunity to demonstrate responsible borrowing behavior.
🏛️ UK Government and Official Guidance
MoneyHelper emphasises the importance of building a credit history to improve your credit score. They recommend actions such as opening and managing a current account, paying bills on time, and using eligibility checkers before applying for credit. These steps can help demonstrate to lenders that you’re a reliable borrower.
Citizens Advice advises that when choosing a credit card, it’s crucial to consider factors like the Annual Percentage Rate (APR), fees, charges, and incentives. They also highlight the importance of understanding what happens when you apply for a credit card and what to do if your application is refused.
citizensadvice.org.uk
⚠️ Considerations and Potential Drawbacks
While credit-building credit cards can be advantageous, it’s essential to be aware of potential pitfalls:
- High Interest Rates: These cards often come with higher APRs. Failing to pay off the balance in full each month can lead to significant interest charges.
- Low Credit Limits: Initial credit limits may be low, which requires careful management to avoid maxing out the card, as high credit utilization can negatively impact your credit score.
- Risk of Debt Accumulation: Misusing the card or missing payments can harm your credit score further and lead to debt accumulation.
