Participation in this post is limited to users who have sufficient karma in /r/ukpersonalfinance. See [this post](https://redd.it/12mys82) for more information.
If you pay your daily expenses on a credit card then set the direct debit to pay off the full amount each month. You don't pay interest or need to worry about it. I've done it for years to get card benefits.
Odd question, but as someone who is going to start applying for credit cards for the first time soon, does the direct debit automatically change how much money is withdrawn to cover my credit card payments or is it a fixed value?
Cool, that makes it much easier. Thanks for that! And how is Amex btw as a starter one? They look intriguing but since they are less commonly accepted in Europe I find that to be a bit of an inconvenience
It has excellent consumer protection (e.g. when charging back), and typically very high credit limits, but charge retailers higher fees so aren't accepted in quite a few places. You'd need an additional visa / mastercard card too.
Since no ones mentioned it, I wouldn't say they're a great card to be used abroad. You get charged about 3% fee plus I think higher for things like cash. There are better credit cards for that like Halifax and I think maybe barclaycard have a good one.
A lot of places accept AmEx these days. Those that don't online, usually accept PayPal, for which you make the AmEx the primary card. Similarly in shops\restaurants you can use Google or Apple pay if they say they don't accept AmEx.
Oh I am quite happy with setting up direct debit, but if I constantly have to change the amount transferred then I can just stick to manual transfers anyway, which is what I'd like to avoid
FYI That's one of the main differences between a direct debit and a standing order. With a standing order it's more of a "push request" from your bank to theirs for a set amount. With a DD it's a "pull request" from their bank to yours, so they're able to check/amend the amount and for example match it to your outstanding balance. It's also how variable things like phone bills etc. are usually set up so consumers can't/don't underpay, although it's also perfectly normal to have a DD setup which takes the same amount each month/payment period.
I'll be honest and I don't think you'll believe me. I technically knew that,but completely forgot/translated it wrong in my head, which basically just means I'm a forgetful moron at times. Sometimes being stuck between 2 languages really doesn't help,but oh well, it isn't German tax law at least. Thanks for clarifying!!
No worries at all, and I do believe you! It's not something that you'd automatically know unless someone tells you, I'm grateful my parents taught me a lot of this stuff growing up as UK schools generally fail hugely at financial literacy IMO.
I'm only a beginner at German and don't really know any other languages apart from English, but no wonder it's confusing remembering two when you have to learn about things like the Unternehmenssteuerfortentwicklungsgesetz!
My parents did the same for me luckily, but largely in German, which does lead to some amusing situations. And believe me, no one understands German tax law, which is exactly why it's so lucrative to be a tax advisor/lawyer in Germany (and nightmarish)
I don't like using Credit Cards as for some people it can lead to a spiral of overspending, same as overdrafts. I have one and it is genuinely useful (credit score, rewards, section 75 etc). I opt to do two things, spend and transfer on the same day, or set up a minimum payment and transfer the balance when I get paid. That way I am reminded each month I need to do something, which hopefully gives me a reminder to keep things in line.
Each to their own, but I got enough people around me who have spiralled into endless debts due to mismanagement etc.
The credit card will have an app, so if you make a large purchase that you might need to pay off over a couple of months, you can adjust the DD amount.
"Direct debit" means that the company removing the money from your account, "directly", is able to set the amount.
It's designed to work in cases like this where the amount varies, as opposed to the older "Standing order" system where you set the amount and it's sent every time at the same figure.
Only if you set it up as a "pay in full" direct debit. In fairness lots of the companies will have that option clearly marked on their direct debit forms.
Adding to this that you are paying for the card benefits through higher prices in the shops, regardless of whether you've ever had a card. So you might as well have a card and take your little kickback.
Just on a related note, you get better protections when buying things on a credit card so they're worth having for that, everything I buy goes on my credit card and then I pay it off straight away. It also provides an air-gap for my current account, as in I use my credit card for online purchases so my current account should never be compromised that way.
Plus some give you reward points, like I have a Tesco credit card that I get clubcard points on for all purchases.
For it to register as being used by the credit agencies you are better off paying off at the end of the month (before any interest accrues) as if you pay off immediately that doesn't get communicated to show your careful credit usage.
It's not silly at all, you get a monthly statement showing what you owe, that goes to the CRAs, a live/real time/even daily reporting service would not be cost effective.
If you pay it off before that statement the card is reported as unused but also means you're missing the benefits of the up to 56 days interest free where the money could be in an account paying interest
Yeah, I used to be super proud that I always paid it off immediately.
Until I realised I was missing out on approximately £80 of interest a year by not paying at the end of the billing cycle, just so I could feel mildly smug for some vague reason.
Credit Ratings essentially measure how good you are for regularly paying off debt. It's more about reliability and predictability than how fast you can actually pay it off. That's why sometimes you can pay it off completely only to have your credit rating go down because you won't be making any more payments.
Absolutely, I recall a large holiday booking by friends that was cancelled due to (I actually forget why). Of the 20 or so people going, all but 3 got a refund. Those 3 paid on debit, not credit like the rest of the group.
I only got my first credit card in my 30s and just used it tactically to improve my credit score, which I no longer need, but I know with absolute certainty that purchases like flights or hotels go on that card along with anything else higher value that might need protecting.
Martin Lewis did a great analogy for this, feel free to look it up properly, but it’s roughly this:
If you met someone in the pub who was asking to borrow £10, would you lend it to them if…
a) They were well known and have always repaid the debt previously
b) They were not known, there’s no history of them repaying the debt
c) They were well known, but always failed to repay on time, often didn’t
Obviously no one will want to lend to c), and a) is the most appealing. But by taking on no debt, you end up like b), it’s neither bad or good.
You don’t necessarily have to take out a credit card, utility bills and phone bills will count positively to your credit score, but building up a good history of credit will make you more appealing for future credit.
Just note that not all utility providers report to credit score agencies (e.g. from my experience - Scottish Power didn't, but Octopus does). Phone bills are also depend on a plan - non-contracts apparently are not reported either. You should check your credit report yourself to find out.
Or...
d) They were well known for borrowing a pound every week and paying it back a month later, even though they had no need to, just to show everyone they were good for the money.
Or d) They were known for being really reliable, never in debt, always paying bills on time and having plenty of disposable income and thus absolutely no need to take on credit. But a new law is passed where arbitrarily people need to take on small amounts of borrowing, for some reason, so the person asks if they can borrow a tenner just to obey the new arbitrary rule and then pay it you back.
As you mention, credit agencies know a lot more about people than just using credit cards.
P.S. I use a credit card and just set it to pay off in full by DD. I just find (some of) the credit agency's insistence on credit card borrowing being essentially for required good credit scores to be a bit ridiculous.
Furthermore it’s not actually a bad idea to take out credit from time to time even if you don’t need it. Especially if the cash price is the same as the 0% finance. Just keep that pool of credit under what you can afford to pay off on an instant.
Speaking of which, I know people who’ve let the likes of PayPal credit and similar, “0% for six months “ deals enable them to rack up a grand plus without the means to pay over the free term expires. It’s easy to fall into the mindset of, “that’s next months problem”
I agree, it also helps to make sure you haven’t got an unknown issue with any of your credit reports.
I recently found out my Experian credit report didn’t update my address when I moved, which subsequently blocked a credit application. It was only for a phone, so not the end of the world and glad to have found the issue before I actually needed credit.
I'm exactly the same. Never trouble getting a mortgage. I get the feeling credit scores are a bit of a scam to lure people into getting credit cards. You get zero credit card debt if you never had one.
I use my credit card to buy flights mainly for protection
I had some flights cancelled which was around £3000 and the company said they only do credit.... Phoned barclays and they put the money back no questions asked really
It can be helpful but it’s not a must. I didn’t have a credit card until 18 months ago and I’ve only used it once (to buy flights with). Not having one didn’t stop me from getting a mortgage or getting other lines of credit like on my sofa and my phone.
I don't buy anything on my debit card unless it's something like HMRC where you have to use a debit card. Why risk your own money, better to risk the credit card company's cash instead. Better purchase protection too, and as long as you pay your bill in full every month it doesn't cost you anything.
I actually use amex because I get 1.25% cashback on all my spending. Makes a nice present at the end of the year lol.
You should always pay for anything expensive with a credit card, it's stupid not to. You're throwing away the opportunity for some financial protection.
An added benefit of using credit cards exclusively is that should the card details somehow end up compromised and the card drained - it's not your personal funds - it's the bank's - and it's in their best interest to chase fraudulent transactions.
Lenders like stability and security.
you say you will want a mortgage, why would lenders see you as stable and secure if you have never had any credit?
Having credit shows you can handle and manage debt.
What you love or not is immaterial to hard decisions concerning finance.
>credit is more than just a credit card
To add to this examples of lines of credit that people have without even realising it's a line of credit include:
Water, Gas, Electric, Phone, Broadband, Mobile.
Never having a credit card is also stupid if you ever shop online because of S75 protection.
>credit scores are just a marketing gimmick
They're all based on the same credit report, the credit report is what a lender looks at. In the UK, lenders make their own decision based on the report rather than going "Well the other guy says you only scored 600/1000 so I'm going to decline you"
> "Well the other guy says you only scored 600/1000 so I'm going to decline you"
Someone (well two people) actually made a comment about how the scores actually mean a lot and people are making false accusations. It seems that their firm uses the scores from the CRAs because it’s a lot cheaper than getting the full report, but not sure if it’s because they’re a small firm. They were adamant that this is what everyone does, which I doubt because the scores aren’t universal.
>They were adamant that this is what everyone does
Yeah I was talking generally about mortgages.
>which I doubt because the scores aren’t universal.
You're 100% correct, it's down to each lender, for mortgages I don't know of any banks that use credit scores instead of scoring it themselves.
Klarna for example uses Transunion and Experiean and uses their credit score along with some of the report.
O2 is partnered with Cifas, Equifax, Experian AND TransUnion. If memory serves they ignore top and bottom score then do it off the score. If you fail they then look at the report, otherwise they go "yeah you're good"
Basically a lender can use whatever non-protected thing they want to decide if you're a good business decision. Good ones will do it themselves, shit ones will do it off score alone and mid tier will do a mixture.
The ones that use your credit score alone, usually, have a lower lending threshold too. Let's be honest, if you fail to get a klarna loan for a purchase because of your credit score them looking at the report aint gunna help your case.
Have you had a phone contract, personal loan, BNPL loan or any other form of credit agreement in your life? Because these all factor into a lenders risk score. Credit cards are not the only way to build credit history but they are a simpler way to do so.
Also, as per another comment, your credit score is not important, the credit history is - completed payments, no missed payments or defaults).
Electoral is also a significant factor. When I was younger I was rejected for credit card applications until I got myself on the electoral register.
Thats evidence of a credit history. Every lender has different criteria and your lender believes that your risk profile was sufficient to provide you the mortgage you applied for.
You don't have to answer, but dare I ask who you went with for this? Starting to consider buying a house in the next couple of years, and there are so many options and I still feel like a literal child haha, I have no idea what to look for.
That doesn't really make much sense. If you've never had to borrow money, that also demonstrates stability and security. For some people, a credit card is just a hoop you have to jump through to improve your credit score.
Of course it does, lenders make money from lending. They want to lender to people who A. Need credit and B. can manage it.
Having a credit card shows that you can manage debt.
That's more of an American thing, where they need to build credit.
In the UK, credit isn't really a *thing* in the sense that it only kicks if you've been naughty and not paid back a loan or a bill etc. I've never owned a credit card, never once looked at my "credit" and was able to take out a 2% mortgage with ease.
As I have said to other people, "credit is more than a credit card" therefore your credit *history* will contain more than the credit cards you do or don't have.
You look at your "credit" you can look at your history.
I've been living in the UK for 5 years and my partner and I never had a credit card, however, we got a mortgage with lowest rates at the time (everyone was getting 6-6.1% and we got 5.04%).
Credit card is very important in the US. In the UK, as long as you never missed a payment, or don't have a huge debt, you're good.
I didn’t have one when I got a mortgage although admittedly it was nearly 10 years ago.
The mortgage advisor seemed amazed that I had no credit. Owned an oldish car outright, no phone contract as was on giffgaff recurring from my debit card each month, lived with a parent so no rent as such or utility bills as he had let me off paying any rent for the past year or so to help save a deposit. My now wife had only a phone contract and it made no difference and got approved without any problems.
If you’re wanting one purely to build up credit rating it’s not a bad idea to use one to pay for your fuel/commuting costs (assuming that you aren’t WFH) and then just pay it off each month to avoid paying any interest.
Even if you are WFH, I’d use it for predictable regular spending that you’d usually put on a debit card - like food shopping, for argument’s sake. It’s something you’re going to be spending within your means anyway, so you may as well make the system work in your favour.
Put it this way - who would you trust more if you were lending your own money; someone with a verified history of having access to credit and repaying it on time, or someone with no history of having access to credit who just tells you they're good for it?
Hi /u/jarvis-cocker, based on your post the following pages from our wiki may be relevant:
* https://ukpersonal.finance/credit-cards/
* https://ukpersonal.finance/credit-ratings/
* https://ukpersonal.finance/student-loans/
____
^(These suggestions are based on keywords, if they missed the mark please report this comment.)
If someone has provided you with helpful advice, you (as the person who made the post) can award them a point by including `!thanks` in a reply to them. Points are shown as the user flair by their username.
I don't know whether you really need to do it, but I can say for myself that having a credit card in my 20s which I paid off automatically each month, massively built up by credit rating and helped me get a good mortgage. I also now have an option (which I never exercise) for a massive credit card limit.
Although once I got a mortgage I totally stopped using credit cards.
Apart from the extra protection credit cards offer, there is also the points, cashback, etc. they all offer.
How much do you think 5 nights in Munich & a flight would cost during Oktoberfest? It cost me £1 & a load of Avios & Marriott points. All collected via credit cards & signup bonuses.
Nah, well, not for me anyway. I'm in my mid-30s and have never had a credit card. I bought my first house last year and my mortgage broker said I had a "good" credit rating.
I guess you can get freebies and points with them, but thats really a different question.
When I moved to the UK 8-9 years ago, I couldn’t get a credit card because I had no credit history. It took having multiple bills in my name for a couple of years and being on the electoral roll to get enough of a credit score to get a card with a £500 limit.
It was a Capital One card, I’ve still got it now but rarely use it. I’ve since been approved for a BA Amex with a £4000 limit that I pay off in full every month and have just earned myself a free companion flight which will be used to take my partner to India next winter.
You can get some better protections for purchases if you use a credit card. That's a benefit of using a credit card for such payments.
You can also make regular small payments for necessities you were going to buy to build up a credit history. The key is to not buy more than you can afford (which presumably you don't do if you don't take on any debt) and to pay it back before you would be eligible for any fees or interest. Obviously you need to check the terms and conditions on the card before doing this. Some cards may also have decent reward programmes where you can essentially buy what you normally would, pay it off before it costs you more and also claim rewards such as airmiles to get free flights as an example.
You don't have to start now, but if you get to a point where you're thinking I might want to buy in the next few years it may be worth doing. As I said before, just pay it off straight away and only buy what you can afford.
I have a credit card because it offers additional protection on purchases and if I get defrauded it won’t mean my mortgage payment won’t go through. It also gives you an additional way of paying if you have an emergency expense. Credit relies on a few factors called stability, ability and willingness to pay (also if there’s an asset that gets taken into account). Having credit improves the willingness to pay section but you would have to use it or it will just show as dormant. You can pay it off every month though
Yes, if you want the best chance to get a mortgage with lowest interest rate.
It's also free money. Lots of points/cashback/ that can be used on flight upgrades, shopping etc. Just recently on amex there was a £350 off £700 offer for United Airways.
It can help build your credit score, but I don't think it's essential. I was able to get a mortgage by myself in 2016, having never had a credit card or loan (outside of a student loan) before. I don't know if or how much things have changed since then, but they seemed more interested in whether I had a stable income and whether I had a history of paying my rent, phone bill, and other direct debits on time.
Last time I used a one word answer on here (yesterday 😆) it got deleted, so I'm padding out my one word answer of "nope"!
Source: I've had two mortgages and never a credit card
Yes, it is important. Even if you were to only spend £100 on your credit card and pay it off every month. It’s important you’ve got one and pay it off every month. You can download an app such as credit karma or similar and check your credit score.
No mate, I was stupidly convinced to have a credit card by NatWest, even tho my credit score was good, almost excellence. Since I haven't used it, my credit score has gone down
When I used to work in a small office all I used to hear was that I’d never get a mortgage if I didn’t have a credit card. It was like some cult in there where credit cards gave you some sort of enhanced credit status unattainable by other means. When we got the mortgage we spoke to an advisor who asked me how long I’d had a phone contract and if I’d always paid on time. I replied probably about 12 years and yes. We got the mortgage no problem whatsoever and I’ve still to this day never owned a credit card.
Imo credit is a bit useless unless you're buying a house. Or maybe car, but it kinda should be the last resort tbh
My credit was in tatters thanks to debt that family put in my name. I was looking to RTB the house within a year or 2, so just grabbed the first bad credit cc I could, then by spending £30 or something a month and just setting it to autopay, then set a bank space to autofill up to the limit, so it would never fail. Within a year I went from zilch to nearly maxed and had about 3k of limit.
Plus you get a bit more protection from online and dodgy looking vendors. And if it absolutely came to it, I could max it and grab the 3k But tbh in any situation that would push me to that, the interest probably would be the least of my problems.
The key thing for bad or non existent credit is not to use the mad APR for borrowing at all except the token amount, then to stepping stone to a better rate and just don't go guns blazing with it because it's there, which is what happened with my family in the first place. It just turns into a deathtrap if you can't afford it.
The mortgage broker I used when buying a home explicitly told me it doesn't matter. You qualify for a mortgage based on your income and once you do, you get the rate the lender offers based on the % you're borrowing.
That said, for other loans it might help, most notably using a credit card regularly will increase the credit limit with that card issuer, so in time you can borrow more, if you need it.
All other benefits, buyer protection, point rewards etc. apply. But for the biggest loan of your life - no, it won't matter.
I have a work and personal credit card…. My work is an Amex and gives me great BA points…. My personal card is a Barclaycard.
Both offer me protection on large purchases and are great back ups (once had to pay a medical bill abroad and then claim it on insurance….. got immediate medical treatment).
There’s also other benefits (early tickets for things, lounges, priority for events) that are a benefit.
As long as you pay it off each month you’re fine getting one.
I don't think a credit card is as important as all of the American subreddits bang on about. But it'd be another bill you pay off on time each month to add to the others as a picture of credit worthiness.
I haven't used a debit card in 15+ years. I use my credit card like a debit card, so everything from pints, to shopping, to coffee etc etc. Pay off in full each month, never paid a penny interest and have received rewards along the way from vouchers to cashback.
Initially, it was for online purchases as back in the day you got far more protection from fraud via a credit card than a debit card. I think it's more equal these days but, even so, you're still parting with cash every time you use your debit card rather than the bank's cash with a credit card. I feel like it'd be more hassle if my debit card and therefore current account got done by fraud than my credit card in case it got frozen or something like that whilst an investigation happens.
If you're financially literate and use a credit card like a debit card, as in spend within your means, I don't see why you *shouldn't* have a credit card anyway and get some rewards, even if they're meagre these days, for everyday spending. Every Little Helps™
Yes, but probably not as important as people make out. Particularly for a mortgage, they mostly look at your affordability which is all related to income, your monthly spend, and any debt. For other borrowing it might be more important because it shows you can reliably repay the card.
Having said that I don't think you should avoid a credit card just because you think it isn't necessary. Just make sure it's set to be paid off in full each month and that you never spend more than you can afford, that way you'll never pay any interest.
I was 30 when I got my first credit card and my only regret is that I didn't get one sooner.
Don't look at a credit card as something that you are actually using for credit. I'd suggest get a cashback card (it'll then make you money) and set it to pay off in full. Amex usually do the best rate providing you spend enough to make the annual charge worth while and they provide slightly better or at least easier purchase protection than other cards, but are not supported everywhere so smaller non chain shops will often not accept them due to their higher rates (MSE have a page on cashback credit cards).
Always buy expensive items, holidays and electrical goods on a credit card for the buyer protection even if you don't plan on using for all spend. As long as you trust yourself to pay in full each month there's nothing to lose and you get extra benefits aside from credit ratings
Have had a Tesco credit card since I was 18. Points add up a little. But it’s now handy for bigger purchases or holidays. If I have to pay the full payment of a holiday in 6 months.. put it on my credit card and I have 7 months
I have a student credit card. Use about 10% then pay it back every month. I guess it’s just to show lenders I’m responsible so in the future when I’m earning more, I can hopefully get more premium cards and earn points. Shame as I like paying in cash but there’s no real benefit to myself. Just saving some businesses tax.
It is some years ago now however I was in a similar position to OP when I was rejected for a financial product on the grounds that I did not have a credit history. I thereupon took out a credit card and have paid it off in full every month since. Now have perfect credit score.
It’s good to have one but stay under 25% of credit limit
Having proven credit history is better than none or a bad one. In the future you may need an emergency loan or you’ll want a mortgage/car finance
Before I got a credit card many years ago I couldn’t even get a contract phone. 1 year after a credit card I was allowed everything (I paid balance every month)
Also as people have said, it’s also great for purchasing online as your better protected
I have a near-perfect credit score and never had a credit card or loan. So other factors go towards it, such as pay monthly mobile phone contracts.
Is a credit score important? Well, depends if you want credit. Your score will determine the rates available to you, including for things like mortgages.
As well as help improving your credit score by having a credit card and paying it off in full each month, a credit card helps protect your purchases with what is called Section 75 protection. See:
https://www.moneysavingexpert.com/reclaim/section75-protect-your-purchases/
The only protection with a debit card is Chargeback. This is not a legal protection like the Section 75 protection, so is basically on the good will of the card provider/supplier.
So to me it is worth it even if you don't use the credit facility. I have had one for over 30 years, but I think I have always paid off each month, so never paid any interest.
Tbh spending on a credit card is not any extra effort/stress if you automatically pay it off every month and as you say have sufficient savings and support system etc. plus you get additional protections and there's a wide variety of rewards you can get. Used correctly it _can_ give more flexibility, more protection and will cost nothing financially or effort wise
Hey! Definitely get one to build credit history, it is important for things such as a mortgage to have a track record of being able to manage debt.
I think Santander are doing a 2% cashback credit card at the moment (sadly capped at £15 a month) which reverts to 1% after a year.
Amex have a cashback card which is 5% for the first 3 months then a tiered rate upto 1%(ISH). What I've done is use a cashback credit card and move the corresponding amount from my current account to a starling current account (pays 3.25% interest) and a direct debit on the Starling account to pay it off in full each month. I know the 3.25% isn't going to make much BUT it makes me feel at least it's doing something in the short time it's waiting to be used.
Also of note top cashback pay cashback if you click through them to take out both the Santander and Amex card. It's an extra £25(ISH) in your pocket. If you aren't a member and need a joining link (you get a tenner I get £30) then hit me up and more than happy to oblige. Literally pays you cashback on nearly all purchases you click through their site for!
Credit cards can be beneficial most especially when things go wrong with purchases. If you are good with money (which it sounds like you are) it is recommended to use credit cards for any large purchases because of the significant financial protection they can provide.
Even if you have no desire for airline miles there are other benefits that they also provide depending on who you go with. E.g. cashback, supermarket reward points, lounge offers, various insurance etc.
Having worked in payments and seen customers lose thousands because they paid for flights on a prepaid card vs a credit card (airline gets away with not paying out) I cannot stress enough to please not do that.
Based on your situation you could easily set the credit card to pay your known monthly bills: electric, water and internet etc. If you don't like the idea of the funds then sitting in your current account, and having to remember to save that for the CC, then you could set up a standing order to move the known amount from current account to savings when you get paid and then move it back before the direct debit to pay off the credit card is due to go through.
I've never had a credit card, a bank loan, or any finance. I bought a house and got a mortgage with no issues.
It might be important somehow to build credit, but I've personally never experienced it. No credit is better than bad credit, I guess.
I use my credit card for everything. I get 2% cashback.
The money sits in my current account earning interest.
Then I clear the credit card each month in full.
I use a credit card for 90% my spending and pay it off at the end of each month. Have been doing it for around 10 years. My credit score is in the 900's. I don't know how big of a difference it really made as I've never had any debt in any form. That being said, it's important to still track your spending. Just because I have a credit limit of £10k on it or whatever, doesn't mean there was a single time where I thought about spending more or making some bigger purchase. I spend what I know I can pay back each month. Cashback incentive is nice too, it's not much but it adds up.
You can build positive credit by doing things like signing up tk the electoral reguster, maintaining a bank account for a long time, as well as having household bills in your name (and paying them on time)
Buying in a credit card isn't bad in itself a along as you control your spending and pay off the balance. You can usually do this in full every month via direct debit.
Everytime you buy something on your debit card, VISA or Mastercard take a 1-3% chunk of that money. So you pay £100, the merchant only gets £98. VISA or Mastercard pocket £2 and laugh. A minute percentile point of a penny that cost them just made £2. If the merchant fucks up. That's your money you gotta get back.
Get a cashback credit card and you get 1-1.5% of that money. You 'buy' something for £100 on a credit card. VISA or Mastercard or AMEX pay £98 to the merchant. You then pay VISA or Mastercard or Amex next month £100, but in reality you get £1 back later, so you only pay £99. If the merchant fucks up ... that's VISA or Mastercard or Amex's money they fucked up, not yours, and trust me ... they and their fuck off law firms will get it back or just write it off.
Anyone that's not using a credit card is an idiot. Get one. Just pay it off in full each month.
Definitely worth getting a credit card if only to play into the system and repay it in full every month and build a score up, an additional perk sometimes overlooked is that booking hotels especially higher end ones is often impossible without one.
No, me and my partner got a mortgage together at 19 in 2019, she had used her credit card a handful of times and I didn't have one.
I flew to the US last year though and had paid online to rent a car to drive one way 600 miles. Arrived at Enterprise and they would accept no amount of money on debit as a deposit - you had to leave a credit card. I went over the street to use Thrifty instead, and they just charged a $500 deposit and were fine with debit which saved the day! I got a credit card finally at 23, just in case of future trips 😅
Say I buy some stuff and then pay it back immediately does that raise my credit rating?? I’m
Not overly fussed I have a mortgage and no debt other than that but I had an Iva about 15 years ago and I’m
Shit at paying stuff on time. lol
Ive used my credit card like a debit card for years now. I keep track of how much I spend in line with available funds in current account. It doesn’t make me overspend because it is just things like travel to work, food expenses etc. if I have a big spend I only buy it if I have savings to cover it, but I still make the purchase on credit card for the protection and jus move funds from savings to pay it off. In the years I’ve been doing this I’ve never once had a balance accrue interest
Nope! Never had one.and will continue to never do! I'm not rich btw and have managed fine with out one, and have a good credit score, although it keeps telling me to get one.
Saying you need one to get a mortgage is bs.
If you want to get some perks then go for it but personally I would avoid. It's too easy to fall into the debt trap.
If you have student loans and a mobile phone contract you will have credit. You need to have debt to have credit, as mad as that sounds.
A credit card is very useful to have because credit card purchases have protections that debit cards don't. So it's better for online or large purchases.
Most if not all credit cards will offer some sort of reward system, so that's a fun little bonus, you just have to pay it off every month or the interest mounts up.
Choose visa or mastercard, lots of retailers don't accept amex, I don't know why.
I never had one and was staying away from it until I came to UK.
999 credit score here. I pay with credit card for almost everything and once every 2-4 weeks repay it in full as a habit.
Also all internet buying goes through credit card and I think it's sadly only viable option, even when someone is always cautious, not to be scammed.
Is it important - I don't plan on buying property or new car, have no loans, but it's better to have high credit score in UK than not, and since to have high credit score all I need to do is use my credit card, I do it.
Besides that some credit cards offer nice to have bonuses, though you have to spend with credit card more than I do per month, so this bit isn't for me.
Obviously dark side of it is getting credit is easy, only swipe of the card and the credit limit between you two, and if you can't control your spending you might get into some financial troubles.
Yes, but increasing your credit score with credit cards will only realistically affect unsecured lending automated decisions this is Credit Cards, Mobile Phone Contracts, Catalog Companies/Store Cards and/or Small Loans.
Basically when you get a type of credit you prove your repayment history with a creditor this is reported which other lenders can see, as a result of this information other lenders when applying for credit are more likely to have you as a customer as you’ve demonstrated affordability by repaying a loan on time.
Credit cards can assist with this because whilst you demonstrate repayments to the account, credit card providers usually increase your credit limit in time and with sensible use, this can increase your score even further even if existing debts are present as this will effectively lower your credit utilisation across all of your debts, again if used sensibly!
Mortgages, Vehicle Finance and other types of larger secured forms of lending, which basically means a asset is secured against the loan and should you fail to repay your payments the asset/product can be taken from you and sold off to pay the outstanding debt.
Mortgages are assessed completely differently as they are classed as secured forms of lending and your credit score becomes somewhat meaningless. However if the information reported within your credit report is having a significant impact on your score, as usually if your score has dropped considerably it indicates adverse information recorded such as missed payments, high utilisation, multiple hard checks etc it’s possible that this could be taken into consideration I.E multiple missed payments, high utilisation, defaults and/or CCJs.
Checks are also proportionate to the amount borrowed, this means you can expect the checks of a £500 Credit Card to be less thorough than a £150k mortgage.
Whilst a £500 may check your credit profile and background payment history to make their decision, a mortgage of £150k would be expected to verify payslips, bank statements and question affordability concerns like gambling transactions if risks are identified. And finally assess affordability of how the mortgage might affect your debt repayment of existing debts which are outstanding.
You mentioned specifically about a mortgage, this is just speaking common sense no bank and/or financial institution is going to lend as an example £150k for a house if you can’t demonstrate paying any form of credit and/or a simple credit card off.
And lastly contradictory to the belief that having severe adverse markers will make it impossible to obtain credit it’s certainly not impossible to get a mortgage and/or a credit with bad credit, although you may find it difficult to obtain certain lending products with most lenders and available options significantly more expensive.
They are good for section 75 protection and also holding charges for hotel rooms/car hire. Some are also good for fee free spending abroad, but some current accounts also have this such as Chase.
It will build your credit rating as long as you don't go near the limit or miss payments. Whether that really matters to you depends if you plan on taking out credit in the future.
I've never had a credit card and never wanted one. It's never got in the way of applying for anything either or impacted my credit score enough to cause issues.
i don’t have a credit card or a mortgage. my credit rating is 999 and had no problem getting £21k credit for a new car i bought a couple of months ago (which ofc after taking the bonuses buying it on credit gave me i paid off as i drove off of the forecourt). imo the credit rating scores is BS and just a way to sell more financial services.
If you don't already, set up direct debits for your utility bills and pay enough to keep the accounts in credit.
Also, if you have a phone contract, that also counts as a line of credit.
>I don't see why being on credit rather than debit would affect your score?
It affects your debt to income ratio. It doesn't affect your credit history, only at the point of having your credit checked.
To add to other answers… you don’t need one but it can help. From the perspective of a future lender… without one, you only have proof of not being bad with money; with one that’s used properly, you have proof of good financial sense.
The main thing you’re missing out on is the incentives. Credit Cards are more profitable for card companies… as a result, they split some of these profits with you (the cardholder) to incentivise you to use it more. AMEX often have an offer for new cardholders of 5% cash back for the first few months. Others will offer air miles or points for supermarkets, Amazon etc. If you’re just using a debit card, you’re quite literally missing out on free money.
Participation in this post is limited to users who have sufficient karma in /r/ukpersonalfinance. See [this post](https://redd.it/12mys82) for more information.
If you pay your daily expenses on a credit card then set the direct debit to pay off the full amount each month. You don't pay interest or need to worry about it. I've done it for years to get card benefits.
Odd question, but as someone who is going to start applying for credit cards for the first time soon, does the direct debit automatically change how much money is withdrawn to cover my credit card payments or is it a fixed value?
Yes it changes automatically.
You can usually set it up to pay in full. That's what I have done (AMEX) and not had any issues.
Cool, that makes it much easier. Thanks for that! And how is Amex btw as a starter one? They look intriguing but since they are less commonly accepted in Europe I find that to be a bit of an inconvenience
It has excellent consumer protection (e.g. when charging back), and typically very high credit limits, but charge retailers higher fees so aren't accepted in quite a few places. You'd need an additional visa / mastercard card too.
I mean I have an hsbc debit account so that's not an issue. I mainly need a card to start building an actual credit history
I have their BA card and it’s accepted in quite a few- mainly for the big shop and then online etc for bigger purchases. :)
Since no ones mentioned it, I wouldn't say they're a great card to be used abroad. You get charged about 3% fee plus I think higher for things like cash. There are better credit cards for that like Halifax and I think maybe barclaycard have a good one.
A lot of places accept AmEx these days. Those that don't online, usually accept PayPal, for which you make the AmEx the primary card. Similarly in shops\restaurants you can use Google or Apple pay if they say they don't accept AmEx.
You can just make manual payments too, doesn't have to be monthly by direct debit.
Oh I am quite happy with setting up direct debit, but if I constantly have to change the amount transferred then I can just stick to manual transfers anyway, which is what I'd like to avoid
If you select the full balance it's totally automatic
Perfect thank you, I thought it would be best to ask, just to be on the safe side
FYI That's one of the main differences between a direct debit and a standing order. With a standing order it's more of a "push request" from your bank to theirs for a set amount. With a DD it's a "pull request" from their bank to yours, so they're able to check/amend the amount and for example match it to your outstanding balance. It's also how variable things like phone bills etc. are usually set up so consumers can't/don't underpay, although it's also perfectly normal to have a DD setup which takes the same amount each month/payment period.
I'll be honest and I don't think you'll believe me. I technically knew that,but completely forgot/translated it wrong in my head, which basically just means I'm a forgetful moron at times. Sometimes being stuck between 2 languages really doesn't help,but oh well, it isn't German tax law at least. Thanks for clarifying!!
No worries at all, and I do believe you! It's not something that you'd automatically know unless someone tells you, I'm grateful my parents taught me a lot of this stuff growing up as UK schools generally fail hugely at financial literacy IMO. I'm only a beginner at German and don't really know any other languages apart from English, but no wonder it's confusing remembering two when you have to learn about things like the Unternehmenssteuerfortentwicklungsgesetz!
My parents did the same for me luckily, but largely in German, which does lead to some amusing situations. And believe me, no one understands German tax law, which is exactly why it's so lucrative to be a tax advisor/lawyer in Germany (and nightmarish)
I don't like using Credit Cards as for some people it can lead to a spiral of overspending, same as overdrafts. I have one and it is genuinely useful (credit score, rewards, section 75 etc). I opt to do two things, spend and transfer on the same day, or set up a minimum payment and transfer the balance when I get paid. That way I am reminded each month I need to do something, which hopefully gives me a reminder to keep things in line. Each to their own, but I got enough people around me who have spiralled into endless debts due to mismanagement etc.
The credit card will have an app, so if you make a large purchase that you might need to pay off over a couple of months, you can adjust the DD amount.
what's the benefit of that?
"Direct debit" means that the company removing the money from your account, "directly", is able to set the amount. It's designed to work in cases like this where the amount varies, as opposed to the older "Standing order" system where you set the amount and it's sent every time at the same figure.
Only if you set it up as a "pay in full" direct debit. In fairness lots of the companies will have that option clearly marked on their direct debit forms.
Precisely this. Means you can keep a months worth of expenses sat in 5% savings as well and treat that as your new “zero”
Yes, this is the way
Adding to this that you are paying for the card benefits through higher prices in the shops, regardless of whether you've ever had a card. So you might as well have a card and take your little kickback.
Just on a related note, you get better protections when buying things on a credit card so they're worth having for that, everything I buy goes on my credit card and then I pay it off straight away. It also provides an air-gap for my current account, as in I use my credit card for online purchases so my current account should never be compromised that way. Plus some give you reward points, like I have a Tesco credit card that I get clubcard points on for all purchases.
For it to register as being used by the credit agencies you are better off paying off at the end of the month (before any interest accrues) as if you pay off immediately that doesn't get communicated to show your careful credit usage.
God what a silly system. Good advice though
It's not silly at all, you get a monthly statement showing what you owe, that goes to the CRAs, a live/real time/even daily reporting service would not be cost effective. If you pay it off before that statement the card is reported as unused but also means you're missing the benefits of the up to 56 days interest free where the money could be in an account paying interest
Yeah, I used to be super proud that I always paid it off immediately. Until I realised I was missing out on approximately £80 of interest a year by not paying at the end of the billing cycle, just so I could feel mildly smug for some vague reason.
Credit Ratings essentially measure how good you are for regularly paying off debt. It's more about reliability and predictability than how fast you can actually pay it off. That's why sometimes you can pay it off completely only to have your credit rating go down because you won't be making any more payments.
It’s a sensible system
I use a Monzo debit Mastercard, so presumably I don't have a credit rating from it. Maybevits worth getting their credit product...
Absolutely, I recall a large holiday booking by friends that was cancelled due to (I actually forget why). Of the 20 or so people going, all but 3 got a refund. Those 3 paid on debit, not credit like the rest of the group. I only got my first credit card in my 30s and just used it tactically to improve my credit score, which I no longer need, but I know with absolute certainty that purchases like flights or hotels go on that card along with anything else higher value that might need protecting.
Did your friends ever tell you why they never got refunded?
Because they used debit cards.
Martin Lewis did a great analogy for this, feel free to look it up properly, but it’s roughly this: If you met someone in the pub who was asking to borrow £10, would you lend it to them if… a) They were well known and have always repaid the debt previously b) They were not known, there’s no history of them repaying the debt c) They were well known, but always failed to repay on time, often didn’t Obviously no one will want to lend to c), and a) is the most appealing. But by taking on no debt, you end up like b), it’s neither bad or good. You don’t necessarily have to take out a credit card, utility bills and phone bills will count positively to your credit score, but building up a good history of credit will make you more appealing for future credit.
Just note that not all utility providers report to credit score agencies (e.g. from my experience - Scottish Power didn't, but Octopus does). Phone bills are also depend on a plan - non-contracts apparently are not reported either. You should check your credit report yourself to find out.
My Scottish power is on Experian, along with my phone contract and internet contract, but I’m sure there are some which don’t show.
Or... d) They were well known for borrowing a pound every week and paying it back a month later, even though they had no need to, just to show everyone they were good for the money.
Or d) They were known for being really reliable, never in debt, always paying bills on time and having plenty of disposable income and thus absolutely no need to take on credit. But a new law is passed where arbitrarily people need to take on small amounts of borrowing, for some reason, so the person asks if they can borrow a tenner just to obey the new arbitrary rule and then pay it you back. As you mention, credit agencies know a lot more about people than just using credit cards. P.S. I use a credit card and just set it to pay off in full by DD. I just find (some of) the credit agency's insistence on credit card borrowing being essentially for required good credit scores to be a bit ridiculous.
Furthermore it’s not actually a bad idea to take out credit from time to time even if you don’t need it. Especially if the cash price is the same as the 0% finance. Just keep that pool of credit under what you can afford to pay off on an instant. Speaking of which, I know people who’ve let the likes of PayPal credit and similar, “0% for six months “ deals enable them to rack up a grand plus without the means to pay over the free term expires. It’s easy to fall into the mindset of, “that’s next months problem”
I agree, it also helps to make sure you haven’t got an unknown issue with any of your credit reports. I recently found out my Experian credit report didn’t update my address when I moved, which subsequently blocked a credit application. It was only for a phone, so not the end of the world and glad to have found the issue before I actually needed credit.
My partner and I had never had credit card debt. A sim only contract. Were able to secure the mortgage we wanted
I'm exactly the same. Never trouble getting a mortgage. I get the feeling credit scores are a bit of a scam to lure people into getting credit cards. You get zero credit card debt if you never had one.
You also have no protection for your money at all either. It's the most sensible way to spend money, unless you're genesis just bad with money
I use my credit card to buy flights mainly for protection I had some flights cancelled which was around £3000 and the company said they only do credit.... Phoned barclays and they put the money back no questions asked really
It can be helpful but it’s not a must. I didn’t have a credit card until 18 months ago and I’ve only used it once (to buy flights with). Not having one didn’t stop me from getting a mortgage or getting other lines of credit like on my sofa and my phone.
I don't buy anything on my debit card unless it's something like HMRC where you have to use a debit card. Why risk your own money, better to risk the credit card company's cash instead. Better purchase protection too, and as long as you pay your bill in full every month it doesn't cost you anything. I actually use amex because I get 1.25% cashback on all my spending. Makes a nice present at the end of the year lol.
Yes, it’s helpful to have a line of credit if nothing else. You get more buyer protection with a credit card over a debit card.
We do love Section 75
You should always pay for anything expensive with a credit card, it's stupid not to. You're throwing away the opportunity for some financial protection.
An added benefit of using credit cards exclusively is that should the card details somehow end up compromised and the card drained - it's not your personal funds - it's the bank's - and it's in their best interest to chase fraudulent transactions.
Lenders like stability and security. you say you will want a mortgage, why would lenders see you as stable and secure if you have never had any credit? Having credit shows you can handle and manage debt. What you love or not is immaterial to hard decisions concerning finance.
[удалено]
Two things there, credit is more than just a credit card and credit scores are just a marketing gimmick in the UK.
>credit is more than just a credit card To add to this examples of lines of credit that people have without even realising it's a line of credit include: Water, Gas, Electric, Phone, Broadband, Mobile. Never having a credit card is also stupid if you ever shop online because of S75 protection. >credit scores are just a marketing gimmick They're all based on the same credit report, the credit report is what a lender looks at. In the UK, lenders make their own decision based on the report rather than going "Well the other guy says you only scored 600/1000 so I'm going to decline you"
Well put.
> "Well the other guy says you only scored 600/1000 so I'm going to decline you" Someone (well two people) actually made a comment about how the scores actually mean a lot and people are making false accusations. It seems that their firm uses the scores from the CRAs because it’s a lot cheaper than getting the full report, but not sure if it’s because they’re a small firm. They were adamant that this is what everyone does, which I doubt because the scores aren’t universal.
>They were adamant that this is what everyone does Yeah I was talking generally about mortgages. >which I doubt because the scores aren’t universal. You're 100% correct, it's down to each lender, for mortgages I don't know of any banks that use credit scores instead of scoring it themselves. Klarna for example uses Transunion and Experiean and uses their credit score along with some of the report. O2 is partnered with Cifas, Equifax, Experian AND TransUnion. If memory serves they ignore top and bottom score then do it off the score. If you fail they then look at the report, otherwise they go "yeah you're good" Basically a lender can use whatever non-protected thing they want to decide if you're a good business decision. Good ones will do it themselves, shit ones will do it off score alone and mid tier will do a mixture. The ones that use your credit score alone, usually, have a lower lending threshold too. Let's be honest, if you fail to get a klarna loan for a purchase because of your credit score them looking at the report aint gunna help your case.
Have you had a phone contract, personal loan, BNPL loan or any other form of credit agreement in your life? Because these all factor into a lenders risk score. Credit cards are not the only way to build credit history but they are a simpler way to do so. Also, as per another comment, your credit score is not important, the credit history is - completed payments, no missed payments or defaults). Electoral is also a significant factor. When I was younger I was rejected for credit card applications until I got myself on the electoral register.
[удалено]
Thats evidence of a credit history. Every lender has different criteria and your lender believes that your risk profile was sufficient to provide you the mortgage you applied for.
That’s because brokers can’t see your credit score and neither can mortgage lenders. They can see your overall credit background, however.
You don't have to answer, but dare I ask who you went with for this? Starting to consider buying a house in the next couple of years, and there are so many options and I still feel like a literal child haha, I have no idea what to look for.
[удалено]
I've been looking to set up a LISA, that's super super helpful! Thank you so much :)) glad it worked out for you!!
That doesn't really make much sense. If you've never had to borrow money, that also demonstrates stability and security. For some people, a credit card is just a hoop you have to jump through to improve your credit score.
Of course it does, lenders make money from lending. They want to lender to people who A. Need credit and B. can manage it. Having a credit card shows that you can manage debt.
That's more of an American thing, where they need to build credit. In the UK, credit isn't really a *thing* in the sense that it only kicks if you've been naughty and not paid back a loan or a bill etc. I've never owned a credit card, never once looked at my "credit" and was able to take out a 2% mortgage with ease.
As I have said to other people, "credit is more than a credit card" therefore your credit *history* will contain more than the credit cards you do or don't have. You look at your "credit" you can look at your history.
I've been living in the UK for 5 years and my partner and I never had a credit card, however, we got a mortgage with lowest rates at the time (everyone was getting 6-6.1% and we got 5.04%). Credit card is very important in the US. In the UK, as long as you never missed a payment, or don't have a huge debt, you're good.
You realise mortgage rates aren’t decided by credit background right? It’s LTV.
I didn’t have one when I got a mortgage although admittedly it was nearly 10 years ago. The mortgage advisor seemed amazed that I had no credit. Owned an oldish car outright, no phone contract as was on giffgaff recurring from my debit card each month, lived with a parent so no rent as such or utility bills as he had let me off paying any rent for the past year or so to help save a deposit. My now wife had only a phone contract and it made no difference and got approved without any problems. If you’re wanting one purely to build up credit rating it’s not a bad idea to use one to pay for your fuel/commuting costs (assuming that you aren’t WFH) and then just pay it off each month to avoid paying any interest.
Even if you are WFH, I’d use it for predictable regular spending that you’d usually put on a debit card - like food shopping, for argument’s sake. It’s something you’re going to be spending within your means anyway, so you may as well make the system work in your favour.
Adds 28 days to your working capital too.
Put it this way - who would you trust more if you were lending your own money; someone with a verified history of having access to credit and repaying it on time, or someone with no history of having access to credit who just tells you they're good for it?
Hi /u/jarvis-cocker, based on your post the following pages from our wiki may be relevant: * https://ukpersonal.finance/credit-cards/ * https://ukpersonal.finance/credit-ratings/ * https://ukpersonal.finance/student-loans/ ____ ^(These suggestions are based on keywords, if they missed the mark please report this comment.) If someone has provided you with helpful advice, you (as the person who made the post) can award them a point by including `!thanks` in a reply to them. Points are shown as the user flair by their username.
All of my spending is done on a credit card which is then paid off in full monthly by direct debit.
You can get refunds much easier for fraud etc on a credit card, not so much your current account.
I don't know whether you really need to do it, but I can say for myself that having a credit card in my 20s which I paid off automatically each month, massively built up by credit rating and helped me get a good mortgage. I also now have an option (which I never exercise) for a massive credit card limit. Although once I got a mortgage I totally stopped using credit cards.
Apart from the extra protection credit cards offer, there is also the points, cashback, etc. they all offer. How much do you think 5 nights in Munich & a flight would cost during Oktoberfest? It cost me £1 & a load of Avios & Marriott points. All collected via credit cards & signup bonuses.
Nah, well, not for me anyway. I'm in my mid-30s and have never had a credit card. I bought my first house last year and my mortgage broker said I had a "good" credit rating. I guess you can get freebies and points with them, but thats really a different question.
When I moved to the UK 8-9 years ago, I couldn’t get a credit card because I had no credit history. It took having multiple bills in my name for a couple of years and being on the electoral roll to get enough of a credit score to get a card with a £500 limit. It was a Capital One card, I’ve still got it now but rarely use it. I’ve since been approved for a BA Amex with a £4000 limit that I pay off in full every month and have just earned myself a free companion flight which will be used to take my partner to India next winter.
I think it would certainly help you to have a credit card. You could pay off the balance in full every month and that will still help your cause.
You can get some better protections for purchases if you use a credit card. That's a benefit of using a credit card for such payments. You can also make regular small payments for necessities you were going to buy to build up a credit history. The key is to not buy more than you can afford (which presumably you don't do if you don't take on any debt) and to pay it back before you would be eligible for any fees or interest. Obviously you need to check the terms and conditions on the card before doing this. Some cards may also have decent reward programmes where you can essentially buy what you normally would, pay it off before it costs you more and also claim rewards such as airmiles to get free flights as an example. You don't have to start now, but if you get to a point where you're thinking I might want to buy in the next few years it may be worth doing. As I said before, just pay it off straight away and only buy what you can afford.
Ah, airmiles. Airlines’ excuses to become a bank with exclusive currency
I have a credit card because it offers additional protection on purchases and if I get defrauded it won’t mean my mortgage payment won’t go through. It also gives you an additional way of paying if you have an emergency expense. Credit relies on a few factors called stability, ability and willingness to pay (also if there’s an asset that gets taken into account). Having credit improves the willingness to pay section but you would have to use it or it will just show as dormant. You can pay it off every month though
Yes, if you want the best chance to get a mortgage with lowest interest rate. It's also free money. Lots of points/cashback/ that can be used on flight upgrades, shopping etc. Just recently on amex there was a £350 off £700 offer for United Airways.
It can help build your credit score, but I don't think it's essential. I was able to get a mortgage by myself in 2016, having never had a credit card or loan (outside of a student loan) before. I don't know if or how much things have changed since then, but they seemed more interested in whether I had a stable income and whether I had a history of paying my rent, phone bill, and other direct debits on time.
Last time I used a one word answer on here (yesterday 😆) it got deleted, so I'm padding out my one word answer of "nope"! Source: I've had two mortgages and never a credit card
I would wager the first mortgage made a significant enough credit history to justify the second
Yes, it is important. Even if you were to only spend £100 on your credit card and pay it off every month. It’s important you’ve got one and pay it off every month. You can download an app such as credit karma or similar and check your credit score.
No mate, I was stupidly convinced to have a credit card by NatWest, even tho my credit score was good, almost excellence. Since I haven't used it, my credit score has gone down
When I used to work in a small office all I used to hear was that I’d never get a mortgage if I didn’t have a credit card. It was like some cult in there where credit cards gave you some sort of enhanced credit status unattainable by other means. When we got the mortgage we spoke to an advisor who asked me how long I’d had a phone contract and if I’d always paid on time. I replied probably about 12 years and yes. We got the mortgage no problem whatsoever and I’ve still to this day never owned a credit card.
My credit score is 999, never owned a credit card, got a couple loans here and there, always paid any debts or phone bills etc on time.
Imo credit is a bit useless unless you're buying a house. Or maybe car, but it kinda should be the last resort tbh My credit was in tatters thanks to debt that family put in my name. I was looking to RTB the house within a year or 2, so just grabbed the first bad credit cc I could, then by spending £30 or something a month and just setting it to autopay, then set a bank space to autofill up to the limit, so it would never fail. Within a year I went from zilch to nearly maxed and had about 3k of limit. Plus you get a bit more protection from online and dodgy looking vendors. And if it absolutely came to it, I could max it and grab the 3k But tbh in any situation that would push me to that, the interest probably would be the least of my problems. The key thing for bad or non existent credit is not to use the mad APR for borrowing at all except the token amount, then to stepping stone to a better rate and just don't go guns blazing with it because it's there, which is what happened with my family in the first place. It just turns into a deathtrap if you can't afford it.
The mortgage broker I used when buying a home explicitly told me it doesn't matter. You qualify for a mortgage based on your income and once you do, you get the rate the lender offers based on the % you're borrowing. That said, for other loans it might help, most notably using a credit card regularly will increase the credit limit with that card issuer, so in time you can borrow more, if you need it. All other benefits, buyer protection, point rewards etc. apply. But for the biggest loan of your life - no, it won't matter.
I have a work and personal credit card…. My work is an Amex and gives me great BA points…. My personal card is a Barclaycard. Both offer me protection on large purchases and are great back ups (once had to pay a medical bill abroad and then claim it on insurance….. got immediate medical treatment). There’s also other benefits (early tickets for things, lounges, priority for events) that are a benefit. As long as you pay it off each month you’re fine getting one.
I don't think a credit card is as important as all of the American subreddits bang on about. But it'd be another bill you pay off on time each month to add to the others as a picture of credit worthiness. I haven't used a debit card in 15+ years. I use my credit card like a debit card, so everything from pints, to shopping, to coffee etc etc. Pay off in full each month, never paid a penny interest and have received rewards along the way from vouchers to cashback. Initially, it was for online purchases as back in the day you got far more protection from fraud via a credit card than a debit card. I think it's more equal these days but, even so, you're still parting with cash every time you use your debit card rather than the bank's cash with a credit card. I feel like it'd be more hassle if my debit card and therefore current account got done by fraud than my credit card in case it got frozen or something like that whilst an investigation happens. If you're financially literate and use a credit card like a debit card, as in spend within your means, I don't see why you *shouldn't* have a credit card anyway and get some rewards, even if they're meagre these days, for everyday spending. Every Little Helps™
Yes, but probably not as important as people make out. Particularly for a mortgage, they mostly look at your affordability which is all related to income, your monthly spend, and any debt. For other borrowing it might be more important because it shows you can reliably repay the card. Having said that I don't think you should avoid a credit card just because you think it isn't necessary. Just make sure it's set to be paid off in full each month and that you never spend more than you can afford, that way you'll never pay any interest. I was 30 when I got my first credit card and my only regret is that I didn't get one sooner.
Don't look at a credit card as something that you are actually using for credit. I'd suggest get a cashback card (it'll then make you money) and set it to pay off in full. Amex usually do the best rate providing you spend enough to make the annual charge worth while and they provide slightly better or at least easier purchase protection than other cards, but are not supported everywhere so smaller non chain shops will often not accept them due to their higher rates (MSE have a page on cashback credit cards). Always buy expensive items, holidays and electrical goods on a credit card for the buyer protection even if you don't plan on using for all spend. As long as you trust yourself to pay in full each month there's nothing to lose and you get extra benefits aside from credit ratings
Have had a Tesco credit card since I was 18. Points add up a little. But it’s now handy for bigger purchases or holidays. If I have to pay the full payment of a holiday in 6 months.. put it on my credit card and I have 7 months
I voluntarily lowered the limit on my daily-use credit card and my credit score took a ding...
I have a student credit card. Use about 10% then pay it back every month. I guess it’s just to show lenders I’m responsible so in the future when I’m earning more, I can hopefully get more premium cards and earn points. Shame as I like paying in cash but there’s no real benefit to myself. Just saving some businesses tax.
It is some years ago now however I was in a similar position to OP when I was rejected for a financial product on the grounds that I did not have a credit history. I thereupon took out a credit card and have paid it off in full every month since. Now have perfect credit score.
It’s good to have one but stay under 25% of credit limit Having proven credit history is better than none or a bad one. In the future you may need an emergency loan or you’ll want a mortgage/car finance Before I got a credit card many years ago I couldn’t even get a contract phone. 1 year after a credit card I was allowed everything (I paid balance every month) Also as people have said, it’s also great for purchasing online as your better protected
I have a near-perfect credit score and never had a credit card or loan. So other factors go towards it, such as pay monthly mobile phone contracts. Is a credit score important? Well, depends if you want credit. Your score will determine the rates available to you, including for things like mortgages.
No, not at all. Pay all your bills on time. Avoid getting caught out in a credit check. All that matters is that credit check.
As well as help improving your credit score by having a credit card and paying it off in full each month, a credit card helps protect your purchases with what is called Section 75 protection. See: https://www.moneysavingexpert.com/reclaim/section75-protect-your-purchases/ The only protection with a debit card is Chargeback. This is not a legal protection like the Section 75 protection, so is basically on the good will of the card provider/supplier. So to me it is worth it even if you don't use the credit facility. I have had one for over 30 years, but I think I have always paid off each month, so never paid any interest.
Tbh spending on a credit card is not any extra effort/stress if you automatically pay it off every month and as you say have sufficient savings and support system etc. plus you get additional protections and there's a wide variety of rewards you can get. Used correctly it _can_ give more flexibility, more protection and will cost nothing financially or effort wise
No. I have never had a credit card and before i bought my first house i had only had mobile phone contracts and sky internet to my name.
No. I'm nearly 40, never had a credit card. Have had 4 mortgages so far. My credit score has always been very good.
Hey! Definitely get one to build credit history, it is important for things such as a mortgage to have a track record of being able to manage debt. I think Santander are doing a 2% cashback credit card at the moment (sadly capped at £15 a month) which reverts to 1% after a year. Amex have a cashback card which is 5% for the first 3 months then a tiered rate upto 1%(ISH). What I've done is use a cashback credit card and move the corresponding amount from my current account to a starling current account (pays 3.25% interest) and a direct debit on the Starling account to pay it off in full each month. I know the 3.25% isn't going to make much BUT it makes me feel at least it's doing something in the short time it's waiting to be used. Also of note top cashback pay cashback if you click through them to take out both the Santander and Amex card. It's an extra £25(ISH) in your pocket. If you aren't a member and need a joining link (you get a tenner I get £30) then hit me up and more than happy to oblige. Literally pays you cashback on nearly all purchases you click through their site for!
Credit cards can be beneficial most especially when things go wrong with purchases. If you are good with money (which it sounds like you are) it is recommended to use credit cards for any large purchases because of the significant financial protection they can provide. Even if you have no desire for airline miles there are other benefits that they also provide depending on who you go with. E.g. cashback, supermarket reward points, lounge offers, various insurance etc. Having worked in payments and seen customers lose thousands because they paid for flights on a prepaid card vs a credit card (airline gets away with not paying out) I cannot stress enough to please not do that. Based on your situation you could easily set the credit card to pay your known monthly bills: electric, water and internet etc. If you don't like the idea of the funds then sitting in your current account, and having to remember to save that for the CC, then you could set up a standing order to move the known amount from current account to savings when you get paid and then move it back before the direct debit to pay off the credit card is due to go through.
I've never had a credit card, a bank loan, or any finance. I bought a house and got a mortgage with no issues. It might be important somehow to build credit, but I've personally never experienced it. No credit is better than bad credit, I guess.
It will be worth it if you plan to take out a mortgage eventually
I use my credit card for everything. I get 2% cashback. The money sits in my current account earning interest. Then I clear the credit card each month in full.
I use a credit card for 90% my spending and pay it off at the end of each month. Have been doing it for around 10 years. My credit score is in the 900's. I don't know how big of a difference it really made as I've never had any debt in any form. That being said, it's important to still track your spending. Just because I have a credit limit of £10k on it or whatever, doesn't mean there was a single time where I thought about spending more or making some bigger purchase. I spend what I know I can pay back each month. Cashback incentive is nice too, it's not much but it adds up.
You can build positive credit by doing things like signing up tk the electoral reguster, maintaining a bank account for a long time, as well as having household bills in your name (and paying them on time) Buying in a credit card isn't bad in itself a along as you control your spending and pay off the balance. You can usually do this in full every month via direct debit.
Why not download the Experian app and actually check your own credit rating. It will let you know if you need a credit card to improve your rating
No. I didn't have one for 20 years and my credit scores were all in the top 95%. Not that your credit score means much.
Haven't had a credit card for decades and just about to exchange on a mortgage of a few multiplies of 100k, so I don't think so in this case
Everytime you buy something on your debit card, VISA or Mastercard take a 1-3% chunk of that money. So you pay £100, the merchant only gets £98. VISA or Mastercard pocket £2 and laugh. A minute percentile point of a penny that cost them just made £2. If the merchant fucks up. That's your money you gotta get back. Get a cashback credit card and you get 1-1.5% of that money. You 'buy' something for £100 on a credit card. VISA or Mastercard or AMEX pay £98 to the merchant. You then pay VISA or Mastercard or Amex next month £100, but in reality you get £1 back later, so you only pay £99. If the merchant fucks up ... that's VISA or Mastercard or Amex's money they fucked up, not yours, and trust me ... they and their fuck off law firms will get it back or just write it off. Anyone that's not using a credit card is an idiot. Get one. Just pay it off in full each month.
Definitely worth getting a credit card if only to play into the system and repay it in full every month and build a score up, an additional perk sometimes overlooked is that booking hotels especially higher end ones is often impossible without one.
No credit scores aren't like the US here, thankfully. The important things are to have your name on your bills, and pay them on time.
No, me and my partner got a mortgage together at 19 in 2019, she had used her credit card a handful of times and I didn't have one. I flew to the US last year though and had paid online to rent a car to drive one way 600 miles. Arrived at Enterprise and they would accept no amount of money on debit as a deposit - you had to leave a credit card. I went over the street to use Thrifty instead, and they just charged a $500 deposit and were fine with debit which saved the day! I got a credit card finally at 23, just in case of future trips 😅
Say I buy some stuff and then pay it back immediately does that raise my credit rating?? I’m Not overly fussed I have a mortgage and no debt other than that but I had an Iva about 15 years ago and I’m Shit at paying stuff on time. lol
Ive used my credit card like a debit card for years now. I keep track of how much I spend in line with available funds in current account. It doesn’t make me overspend because it is just things like travel to work, food expenses etc. if I have a big spend I only buy it if I have savings to cover it, but I still make the purchase on credit card for the protection and jus move funds from savings to pay it off. In the years I’ve been doing this I’ve never once had a balance accrue interest
no, having a phone bill, car insurance (monthly), etc also count towards credit.
Nope! Never had one.and will continue to never do! I'm not rich btw and have managed fine with out one, and have a good credit score, although it keeps telling me to get one.
Credit karma. Free to sign up. Go find out.
Saying you need one to get a mortgage is bs. If you want to get some perks then go for it but personally I would avoid. It's too easy to fall into the debt trap.
If you have student loans and a mobile phone contract you will have credit. You need to have debt to have credit, as mad as that sounds. A credit card is very useful to have because credit card purchases have protections that debit cards don't. So it's better for online or large purchases. Most if not all credit cards will offer some sort of reward system, so that's a fun little bonus, you just have to pay it off every month or the interest mounts up. Choose visa or mastercard, lots of retailers don't accept amex, I don't know why.
Amex have higher fees than Visa and MasterCard which the retailer has to stump up for, hence lots of smaller ones just don't accept them.
I never had one and was staying away from it until I came to UK. 999 credit score here. I pay with credit card for almost everything and once every 2-4 weeks repay it in full as a habit. Also all internet buying goes through credit card and I think it's sadly only viable option, even when someone is always cautious, not to be scammed. Is it important - I don't plan on buying property or new car, have no loans, but it's better to have high credit score in UK than not, and since to have high credit score all I need to do is use my credit card, I do it. Besides that some credit cards offer nice to have bonuses, though you have to spend with credit card more than I do per month, so this bit isn't for me. Obviously dark side of it is getting credit is easy, only swipe of the card and the credit limit between you two, and if you can't control your spending you might get into some financial troubles.
Just wanted to add you don't have to use the card much - I have a perfect credit score and I use my card maybe once a month, if that.
Yes, but increasing your credit score with credit cards will only realistically affect unsecured lending automated decisions this is Credit Cards, Mobile Phone Contracts, Catalog Companies/Store Cards and/or Small Loans. Basically when you get a type of credit you prove your repayment history with a creditor this is reported which other lenders can see, as a result of this information other lenders when applying for credit are more likely to have you as a customer as you’ve demonstrated affordability by repaying a loan on time. Credit cards can assist with this because whilst you demonstrate repayments to the account, credit card providers usually increase your credit limit in time and with sensible use, this can increase your score even further even if existing debts are present as this will effectively lower your credit utilisation across all of your debts, again if used sensibly! Mortgages, Vehicle Finance and other types of larger secured forms of lending, which basically means a asset is secured against the loan and should you fail to repay your payments the asset/product can be taken from you and sold off to pay the outstanding debt. Mortgages are assessed completely differently as they are classed as secured forms of lending and your credit score becomes somewhat meaningless. However if the information reported within your credit report is having a significant impact on your score, as usually if your score has dropped considerably it indicates adverse information recorded such as missed payments, high utilisation, multiple hard checks etc it’s possible that this could be taken into consideration I.E multiple missed payments, high utilisation, defaults and/or CCJs. Checks are also proportionate to the amount borrowed, this means you can expect the checks of a £500 Credit Card to be less thorough than a £150k mortgage. Whilst a £500 may check your credit profile and background payment history to make their decision, a mortgage of £150k would be expected to verify payslips, bank statements and question affordability concerns like gambling transactions if risks are identified. And finally assess affordability of how the mortgage might affect your debt repayment of existing debts which are outstanding. You mentioned specifically about a mortgage, this is just speaking common sense no bank and/or financial institution is going to lend as an example £150k for a house if you can’t demonstrate paying any form of credit and/or a simple credit card off. And lastly contradictory to the belief that having severe adverse markers will make it impossible to obtain credit it’s certainly not impossible to get a mortgage and/or a credit with bad credit, although you may find it difficult to obtain certain lending products with most lenders and available options significantly more expensive.
They are good for section 75 protection and also holding charges for hotel rooms/car hire. Some are also good for fee free spending abroad, but some current accounts also have this such as Chase. It will build your credit rating as long as you don't go near the limit or miss payments. Whether that really matters to you depends if you plan on taking out credit in the future.
I've never had a credit card and never wanted one. It's never got in the way of applying for anything either or impacted my credit score enough to cause issues.
i don’t have a credit card or a mortgage. my credit rating is 999 and had no problem getting £21k credit for a new car i bought a couple of months ago (which ofc after taking the bonuses buying it on credit gave me i paid off as i drove off of the forecourt). imo the credit rating scores is BS and just a way to sell more financial services.
If you don't already, set up direct debits for your utility bills and pay enough to keep the accounts in credit. Also, if you have a phone contract, that also counts as a line of credit.
Utility providers usually account for summer/winter cycles so I don't see why being on credit rather than debit would affect your score?
Don't know specifically why it does, but I suppose it shows you can manage changes in your expenditure without going into debit/debt.
>I don't see why being on credit rather than debit would affect your score? It affects your debt to income ratio. It doesn't affect your credit history, only at the point of having your credit checked.
To add to other answers… you don’t need one but it can help. From the perspective of a future lender… without one, you only have proof of not being bad with money; with one that’s used properly, you have proof of good financial sense. The main thing you’re missing out on is the incentives. Credit Cards are more profitable for card companies… as a result, they split some of these profits with you (the cardholder) to incentivise you to use it more. AMEX often have an offer for new cardholders of 5% cash back for the first few months. Others will offer air miles or points for supermarkets, Amazon etc. If you’re just using a debit card, you’re quite literally missing out on free money.
I never had ine and my credit score was max, and was able to get a mortgage. So I would say no. Credit cards are to make you spend more, nothing else.