Credit Cards For Bad Credit

Credit card blog

Interest rates in UK are regulated by Monetary Policy Committee and the Bank of England. Find out what you need to know about interest rates for improving your bad credit now.

Bank interest rates comprise the rates charged by a country’s central or federal bank on loans and advances in order to control money supply in the economy and ultimately in the banking sector. In general, this is done on a quarterly basis to control inflation and stabilize the country’s exchange rates. It is essential because a fluctuation in bank rates triggers a ripple-effect as it impacts every sphere of a nation’s economy. This is to say that the prices in stock markets tend to react to interest rate changes. A change in bank rates affects customers as it influences prime interest rates for personal loans.

The Bank of England has operational independence while the Monetary Policy Committee (MPC) takes decisions on interest rates. The BoE’s official interest rate constitutes the BoE repo rate which applies to open market operations of the BoE with a group of counter-parties like banks, building societies and securities firms. In the UK, bank rates are set by the Bank of England’s Monetary Policy Committee. The key interest rate is called the official bank rate which is the lowest rate at which the Bank acts as lender of last resort to the financial markets.

When is interest paid?

Interest on savings accounts is usually paid either monthly or annually basis. It’s probably best to opt to pay interest annually unless you expect frequently to dip into your funds. This means that when you take out a loan to buy a new car or if you need credit to get car insurance quotes, the interest rates can affect how much you pay.

The BoE’s Monetary Policy Committee meets once a month and sets the bank interest rates. If observed closely, you’ll find that the committee’s government-set task is to keep inflation below 2% (and above 1%) looking two years ahead. In case, if inflation looks likely to pick up, it raises rates.

On March 8th 2012, the Bank of England’s Monetary Policy Committee voted to maintain the official bank rate paid on commercial bank reserves at 0.5% to the current level. The Committee also voted to continue with its programme of purchasing assets totalling £325 billion duly financed by the issuance of central bank reserves.

The process of applying for a credit card or loan is easy. You just provide some personal information and instantly you learn whether or not you are approved.

Most people don’t realize that every time that you fill out an application and request credit the inquiry becomes attached to your credit score. Whether you are applying for bad credit credit cards or a car loan it has an effect on your credit score.

At some point it doesn’t even matter if you are approved or rejected on the application. As you continue to make requests your score continues to decline.

When potential lenders take a look at your score there is a chance that they are not going to be interested in lending to you or giving you a credit card.

It is important to remember that the lower the credit score the less likely it is that you are going to be approved for credit or a loan. To a lender, a lower credit score means more of a risk. To a consumer a lower credit score means potential denials for credit requests or higher interest rates.

Is there a way to limit the risk? That’s the good news. There are ways to limit the dangers of multiple credit rejections.

The first and simplest solution is to stop applying for credit. The process of changing your credit score takes time. If your last several attempts at gaining credit were rejected, it is time to take a break.

Give your credit some time to recover. This can take months, so be prepared to wait it out until you are sure that your credit is back on track. Even if you want bad credit credit cards, you might want to hold off until the activity on your credit report has settled down.

Sometimes you are on the cusp of being approved or denied a credit card. In some cases it may be to your benefit to skip over the application and wait a little longer.

It can be frustrating to avoid credit opportunities, but in the long run, the benefits of a higher credit score and potentially lower interest rates could be worth it.

Did you know it is possible to find out whether or not you will be approved for a credit card without actually applying? Moneysupermarket.com offers a tool that is helpful for all consumers.

Instead of applying for the credit card, use the tool to provide the necessary information. This tool, without making an imprint on your credit score, will be able to estimate the likelihood of being approved.

These types of tools can let you know whether or not it is worth applying for a credit card, even a bad credit credit card. It doesn’t affect your score but does provide you with the information you need.

If you have only a 20 percent chance of being approved, it probably isn’t worth it to proceed. However, if you have an 85 or 90 percent chance of approval, the risk seems well worth it.

Your credit score is an important part of your financial future. Make sure you are doing all you can to build good credit and maintain a score that will bring credit opportunities to you in the future.

Reward credit cards are cards which earn you points when you use them.  There aren’t often many real gems to be found amongst them as they don’t always compare very favourably with other reward schemes or cashback cards, however, just occasionally one comes along which does offer something good.

The latest reward credit card to hit the market is the Natwest/RBS YourPoints World Credit Card.  It lets you earn rewards with a number of large retailers including Boots and Amazon.

The YourPoints reward system gives you £10 worth of bonus points when you first sign up, and you get the same amount every year on the card’s anniversary.  As well as this, you get 1 point for every £1 that you spend.  A single point is worth ½ a penny typically.

Points can then be spent in a number of retailers including Amazon.co.uk, Boots, Vue Cinemas, Harvey Nichols, British Airways, EasyJet and M&S.

Now getting points worth ½ a penny for every £1 you spend is quite good, and the locations where the points can be spent are pretty wide, They can be spent in quite different ways, for example, you can collect 2,000 points and get a £10 M&S voucher, or for 10,800 points you ca get a flight to Madrid from EasyJet.  Many of the things you can collect for do take quite a large number of points however, so you may find yourself having to save points for quite a while before you can use them on anything you want.  Obviously the website gives more details of different retailers and rewards that are available.

So other than points when you spend, what do you get with this credit card?  Well it does offer some other good features too.  For example, you get 0% on balance transfers for 13 months with a 2.9% fee, and 0% on purchases for 13 months with no fee.

What this means of course is that if you take your card out and use it as often as possible on all your normal spends, save the equivalent amount of money in a high interest savings account, and just pay the minimum monthly repayment until just before the end of the 13 month interest free period, you will not only be getting points for everything you spend, but you can also earn interest in that savings account on all the money you’ve already spent.

You need to bear in mind, that other reward cards aren’t nearly so generous this one does look very promising.  By comparison, most reward credit cards give you less than ¼ of a penny per £1 spent, although at the moment the AA credit card remains very rewarding for users of AA products, and the Tesco card comes with 15 months at 0% on purchases, most are not normally generous, and so the YourPoints card does look pretty good.

If you’re in the UK and you’re stuck in the frustrating cycle of taking out a credit card for improving your score but have a credit score that doesn’t help you qualify for opening a new credit account, don’t give up. You can still get multiple options for opening an account that may include secured credit cards, sub-prime cards and adding a financial hardship statement to your credit history. Comparing the credit cards from multiple lenders may become a difficult option for those with poor credit. Most credit card companies find it easy to lend credit to a person who has shown exceptional financial responsibility when it comes to managing his personal finances. Settling on a credit card with outrageously high APR will make you falter while making the repayments and you may have to run to credit card consolidation companies to manage your unpaid credit card bills.

Most people tend to think that money problems are a result of character flaw but the actual fact is that it may happen to anyone. Don’t think that if you have bad credit record, you credit card application will only land up in the card issuer’s trash box. Don’t count yourself out as there are lot of options that you may resort to, as mentioned earlier. Your personal bank with which you have a checking account and a credit union can help you especially if your credit has taken a hit.

Will sob stories count while getting a credit card with poor score?

If you’re well aware of the fact that you’ve got blemishes on your credit report, you may even increase your odds of getting a credit card by mentioning the reasons that has barred you from timely payments. If you want to secure a credit card despite having poor credit score, you can write a statement explaining your financial hardship, letting creditors know the exact reasons that have led to your tarnished score. Always remember that honesty is the best policy while making the request. Most creditors may often tend to overlook the issue of bad credit if you can show that the unfortunate circumstances that you’re going through were related to your spending habits. If such sob stories are still denied, read on to know what you can do next.

Get yourself secured credit cards to start shopping

Most people who have a poor credit score offer to get secured credit cards against a savings account. You have to deposit a certain amount of money with the bank and you may use your card for shopping for that exact amount. This is better than getting unsecured credit cards as you will not fall in debt by crossing your credit utilization ratio. In such a case, bad credit isn’t an issue as you’re already putting down money that the card issuing company may use if you fail to pay your bills on time.

Costly credit cards can also serve as a worthy alternative

Sub-prime credit card lending institutions are there that assist people with poor credit score. The interest rates may be outrageously high as the companies will try to secure themselves since you display lack of financial awareness through your score. The credit card issuers will tend to charge a huge amount as advance fees on such cards and according to most financial experts, this must be your last resort. According to the Credit Card Act, 2009, the upfront fees have been capped to 25% of the limit of the card in the first year.

While it’s not at all impossible to get a credit card with bad credit, you can also think of waiting for a few days, boosting your credit score by getting help of credit card consolidation companies and then applying for a new card. Manage your personal finances and save enough money to make timely payments on your cards and protect your credit score.

HBOS have revised their credit card charges and streamlined their rates by providing a single rate to individual customers. From Aug HBOS credit card customers will switch over to a personal rate which is calculated on their card between Jan and March 2011 and their will no longer be different rates charged for purchases and cash withdrawals.

From Nov the standard rates offered will be made up of Bank of England base rate and their personal rate.

http://www.bankofscotland.co.uk/

Industry statistics highlight that the number of repossessions on 2011 will be 40’000, but charities are predicting this to be much higher once interest rates kick in.

Debt charity Consumer Credit Counselling Service said it was contacted by 90,000 struggling home owners last year, each with an average debt of £30,160 on credit cards and personal loans.

It also said this figure would break through the 100,000 mark this year as peoples repayments increase on the back of interest rate rises.

Middle class households look set to be particularly vulnerable to the pinch as they would be unable to survive if they lost their main source of income.

Delroy Corinaldi, a director at the CCCS, said: “So many households are just managing to make ends meet, that even a small increase in the cost of their mortgage may push them over the edge. As far as possible, families need to think how they could pay such increases and seek help at the earliest opportunity if they feel that they cannot cope.”

If you sell your old mobile phone on Ebay without deleting your personal details you are at high risk from fraud a new report from CPP reveals.

Over 50% of second hand cell phones contain a high amount of personal information which can be used for fraud.

“This report is a shocking wakeup call and shows how mobile phones can inadvertently cause people to be careless with their personal data,” said Danny Harrison, CPP mobile data expert.

“Consumers are upgrading their mobiles more than ever and it is imperative people take personal responsibility to properly manage their own data.”

“Our experiment found that newer smartphones have more capabilities to store information and that information is much easier to recover than on traditional mobiles due to the increase of applications,” added Jason Hart, CRYPTOCard senior vice president.

Everything Everywhere is set to launch proximity payments in the UK in collaboration with Barclaycard.

The service will come with a flagship mobile handset which will support Near field communications and a new prepaid account both compatible with Barclaycard’s payment infrastructure. This means by the summer more than 42’000 tills including Pret a Manger, Little Chef and the Coop will be able to take money by your waving your phone.

In order to keep your money safe you will be able to top up your prepaid account which is linked to your phone with a debit or credit card, which means that merchant fees are lower therefore making the service far more cost effective for retailers.

Security will also not be an issue as the range of NFC is limited by the use of inducted power, so even the best radio in the world will not be able to read an NFC tag. The usual concerns about modified readers or strangers getting too close on crowded trains apply, though the use of cryptographic authentication between the bank and the SIM (not the handset) should reduce that risk to an acceptable level.

To be able to use the service you need a SIM from Everything Everywhere, which means it will be available across all networks. The handset will need to support the Single Wire Protocol to allow the SIM to communicate with the radio hardware.

Here in the UK we’ve always had a bit of a passion for plastic, but with credit card borrowing falling to just £97bn it’s lowest in the past five years, and the number of cards in use falling to a seven year low of just 60 million, it is clear that this passion is cooling.

PricewaterhouseCoopers consumer credit confidence survey has shown that across the nation there has been a sharp fall in all unsecured borrowing. Over just the last year, the average household borrowing has dropped by around £500, and the survey shows that in 2011 it’s likely to fall by a further £200.

This doesn’t mean that borrowing is low yet however. Household borrowing still remains quite high at an average £8,000 per household and with interest rates set to rise PricewaterhouseCooper’s experts expect that borrowing rates will increase again by around 2-3% by 2015.

One suggestion that seems to be clear from this survey is that these changes in borrowing habits could have quite a profound economic impact. The UK economy has a history of debt fuelled consumption, and this prolonged contraction may well see retail sales impeded and economic growth slow.

It seems that although there has a been a small increase in people’s confidence about managing existing debt, the confidence in future financial security is deteriorating particularly since the government’s spending review. According to the survey, ‘While bad debt levels are beginning to abate, consumers’ lack of confidence in managing their debt should leave lenders on high alert’.

The surveys shows that 41% of people want to save more money which is an increase of 6% over 2009 figures. What’s also interesting is that a larger number (70%) of younger people (18-24yr olds) talk of intending to increase their savings over the following year, while the over 45’s group show less inclination with less than 45% talking of doing this.

One important factor that the survey highlights is the concerns over the impact of banks’ reluctance to deal with any person who doesn’t have a blemish free credit history. It seems that the gap may become filled by door-to-door lenders and pawnbrokers as less people are able to borrow from mainstream lenders. Evidence of this can be seen from Provident Financial’s trading update last week saying that it would beat City profit forecasts. Barnado’s a campaigner for the poor is one of the many campaigners who are worried about this. They said of these doorstep lenders that the high interest rates being charged ‘contribute significantly to the poverty premium’.

It seems that there is clear evidence that the type of credit consumers want and need is changing. Point of sale finance products, home credit providers, pawnbrokers and payday loans may well all be set to play their part in providing what is being asked for. The cost of this credit needs to be made clearer however, and Richard Thompson from PricewaterhouseCooper’s says that he believes more regulation is likely to be necessary.

The bad news released this week is that credit card interest rates are likely to increase in coming weeks. A European commission directive to be rolled out in the UK from the 1st of February will provide credit card users with clearer information before they apply, including a new ‘representative’ APR which shows a clearer picture of the total cost you could accrue.

However whilst these measures will increase overall transparency, it will have the adverse effect of increasing headline rates.

“The basic formula for the calculation of an APR will not change,” said UK Payments Administration, the credit card industry body.
“However, some of the underlying assumptions – for example, the amount of credit to be borrowed – will change. This means that, for credit cards with an annual fee, APRs will increase overnight, perhaps by 1 or 2 per cent, despite the fact that interest rate or fees on the card have not changed.”

There are additional concerns raised that the way this new directive will be launched will mean fewer UK customers will obtain the advertised rates. Currently UK card issuers must offer their typical APR to 2/3rds of applicants with the remainder either declined or offered an higher APR, however the EU only requires this split to be 51%,
The means that nearly half instead of 1/3rd will not know what rate they will be given.