First credit card

kopite_123

I am 18 and have just applied for my first credit card simply to improve my credit rating. All I have at the moment is a cable bill so I really needed something. The only company that would accept me because of this is Capital One. I have no idea about how these cards work or how interest is added, I have just been told to make sure I pay all payments on time every month. I have recently booked a holiday for next year I still have £430 to pay off on, what would your recommendations be in paying off the holiday using my credit card and then just paying off the card each month? I have a limit of £2500 on this card. I also dont know how much they would expect me to repay each month, all my paper work says is


The monthly payment is:
- the full outstanding balance if it is less than £5, but otherwise the greater of:

• An amount equal to the total of (i) 1% of the outstanding balance on your account; (ii) interest applied to your account in that month; (iii) all Default Sums incurred in that month; and (iv) one twelfth of your Annual Fee, or
• £5

Does anyone know roughly what Id be paying back to my card if I used it for this holiday and would they recommend using the card at all? Thanks for any help offered.

daily_2

If you want to avoid interest, then you should set up a direct debit up to pay off the full balance at the end of the month

Paying for a holiday or anything over £100 is a good idea, because you get extra protection if there is a problem with the company/purchase, but only if you pay the full balance off each month, if you don't you will get into debt fast.

kopite_123

Realistically I could probably only afford to pay about £200 a month off it due to other commitments, to be honest I would of preferred a lower limit but this was all they could offer me. Would you still recommend paying off the holiday and then paying £200 a month off the card probably lasting about 3 months with interest? Will this still help my credit rating improve? as this is the main purpose of obtaining and using this card

daily_2

I wouldn't recommend paying any interest at all to "improve" a credit rating. If you can't afford to put it on the card and pay it off when the bill is due, don't spend it. Just because you have a high limit, doesn't mean you have to use it.

How much it costs, would depend on the apr.

kopite_123

Thanks, I've thought about it and I'm just going to spend what I can afford on the card and clear it at the end of every month. I will just pay for the holiday when I have it off my bank card.

LeeSouthEast

Good, sensible decision. You'll be thankful for that one later in life.

cash-magnet

daily wrote: »

If you want to avoid interest, then you should set up a direct debit up to pay off the full balance at the end of the month

Then daily's advice is your best option for you, I hope that's what you do.

Good luck :T

kopite_123

As I have very little credit history this card was very difficult to obtain and the APR on it is 34%, which is over double what I have seen for most cards. After a year or so if I am sensible with this card, my cable bill and my phone contract do you think it would be possible to obtain a better card with lower APR and more benefits as surely my score must have improved.

CannyJock

No guarantees, but much more likely. Pay balance in full by direct debit to ensure you don't miss any payments and avoid any interest charges. From your previous posts it sounds like you applied for a few others before getting the Cap One card? In 12 months time these searches will have come off your credit report too. Also make sure you're on the electoral register at your home address, and keep your "oldest" bank account so you can show you've been at an address and with the same bank for the longest amount of time.

EDIT: Though tbh, if you pay the balance in full each month then the APR is irrelevant.

david_hellier

Credit cards are not suitable for paying for a holiday if you cannot afford it. You cannot afford it if you do not have the money. Save up for it and pay for it at the last opportunity.

NickX

david_hellier wrote: »

Credit cards are not suitable for paying for a holiday if you cannot afford it. You cannot afford it if you do not have the money. Save up for it and pay for it at the last opportunity.

Or you pay on a 0% Credit Card, keep the money elsewhere earning interest, and pay the Card off at the last opportunity.

You will find you've actually managed a small discount on your holiday - should pay for some beers at the airport :beer: