Advice for first credit card

world_of_tights

Hello!

First of all, I apologise if this questions is asked regularly – I have gone back pretty far and haven’t seen anything, but that doesn’t necessarily mean that you’re all not sick to the back teeth of questions like this. Also, super long post – sorry! Warning: patience required to get to the end...

So, to begin with – I am pretty terrified of credit cards, loans etc, I have been offered several credit cards while I was a student and in the last few years, but have always refused them – I am now beginning to regret this. I really should have been building up my credit rating. I do not understand ANY of the jargon that goes along with credit cards, and can only barely grasp the concept of most of the benefits they offer. Really what I am looking for is some sort of simpleton explanation, perhaps performed by the cast of Sesame Street, preferably with a catchy tune...

Anyway, on to the conundrum. I am currently learning to drive, and will hopefully pass my test next month, whereupon I aim to buy a little car and get it insured. I am female and 24, so the rates are relatively low (although still fairly hefty!), but they increase significantly when you want to pay for them monthly. Now I could, I suppose, afford the increased monthly rates, but frankly, I don’t want to – if I could find a way to pay the amount in full then that is what I would like to do. I don’t have the cash, as the cash is for the car, so I am thinking a credit card?

It would be around £800ish, I think – and I could pay back £200 per month. I was considering applying for the RBS classic credit card because I do my banking with them and thought it would be easier to a) get a credit card from my own bank, and b) it would be easier to pay it back if all my finances were with the one company. I have no loyalty to RBS, this is purely because it seems the easiest option to my fragile little mind. However, that card, if I was accepted, only has 0% on purchases for three months, at which time it goes up to 17.95% (said like I know what that means), and I would need at least four months to pay back the £800(ish) – so I would incur charges on the last month(s), right?

The RBS card has 0% on balance transfers for 13 months, but that is a transfer to another credit card, not your current account, right? Would a transfer to your current account cost the earth?

I have been reading about other 0% cards on here, particularly the M&S one and the Tesco one, but I don’t think I would be accepted by them as I have no credit history. Also, I am scared, haha. If you have a 0% credit card, and you make all the payments on time and pay off your sum before the end of the 0% period, then do you incur any other charges? Are there baseline charges that happen despite the 0%? Like, do you pay to have and use the card even if you’re paying it off?

Essentially, I suppose I am just looking for the cheapest way to pay my first car insurance – I was going to post in the insurance section of the forum, but thought my question was most suited to being here. Sorry if that was wrong!

I would be extremely grateful for any advice

Tixy

Hi

Yes you should be more likely to be accepted for a credit card with your own bank.

As you thought the RBS balance transfer deal won't work for you, you cannot transfer this into your current account. A transfer to your current account is treated as a cash advance (same as taking money out the ATM on your credit card - always a bad move, it works out very costly).

So assuming you could get the RBS classic card (and that they gave you a sufficent limit) then yes you would probably end up paying some interest. But in truth it probably won't work out as a very big cost.

So say you pay £800 out and then within the 3month 0% purchase period you have paid back £600. So that leaves you with a balance of £200 and if it takes another month to clear that and the APR is 17.95% then very roughly you'd be looking at £200 x17.95% x1/12 (for the 1month) - so around £3. Depending on your timing of repayments etc it could actually work out as a bit more expensive than that - but even if it ends up at say £10 its still likely to be substantially cheaper than paying for your insurance monthly.

If you could get another card with a longer 0% deal (and you are right that you may struggle to do so) then if you can pay back the whole debt within the 0% period then yep no cost at all. The key thing with credit cards is to always pay at least the minimum payment on time each month (well prefereably a few days before or by DD), If you miss a payment then you lose the 0% deal.

Good luck with the driving.

Angel_of_Tomfoolery

Hi, I'm no expert on credit cards and can't really advise on getting your first one. I got my first one when I went to open a current account and they practically held me at gun-point to take one out...it didn't take me long to figure out why! I was scared of getting one but when I didn't explode the first time I used it, it seemed so easy to use (too easy really).

I would suggest the best way to save money is to shop around for car insurance using a few different comparison websites plus checking the ones which aren't included like Direct Line. I think in terms of paying for it, it depends on how you'll manage your credit card - once it's there it is so tempting to use! If you're disciplined enough to stick to your plan, then it does sound better than paying the bit extra for monthly payments. However, if not, you could end up spending much more in the long term. I don't want to patronise you in any way but please don't underestimate the cost of running a car! I only say that because I'm handing over nearly £1000 this month for MOT,tax, insurance etc and it hurts lol.

IMO it's better to regret not having a credit card than regretting spending on one!

Good luck with your driving test :-)

Trajal

Hehe, good luck with all this.

A word of caution though, someone told me this about 20 odd years ago and I didn't listen but it's worth repeating.

"Once you buy a car you will never stop putting your hand in your pocket for the privilege."

End of lecture! Be prepared!

CLAPTON

well credit cards well used do enhance your credit rating which can be helpful when you apply for a mortgage

however, it is a very bad start to need credit to pay for your first car or insurance
cars are costly to run;

suppose you need to spend money on the car (e.g. a repair) ; how will be pay... put in on the credit card?

have you costed in the car tax, MOTs, RAC/AA, routine serving, petrol etc

without knowing your full circumstances it's difficult to really say but
it may be better to delay buying the car until you have sufficient to pay every thing up front and have some savings as emergency funds

certainly once you have the car saving will be harder.

world_of_tights

CLAPTON wrote: »

well credit cards well used do enhance your credit rating which can be helpful when you apply for a mortgage

however, it is a very bad start to need credit to pay for your first car or insurance
cars are costly to run;

suppose you need to spend money on the car (e.g. a repair) ; how will be pay... put in on the credit card?

have you costed in the car tax, MOTs, RAC/AA, routine serving, petrol etc

without knowing your full circumstances it's difficult to really say but
it may be better to delay buying the car until you have sufficient to pay every thing up front and have some savings as emergency funds

certainly once you have the car saving will be harder.

The thing is, I can more than afford the monthly payments - I am just looking for a way to avoid paying the increase for the luxury of paying monthly.

Currently I pay £220 per month on driving lessons, and save £100-300 per month from my wage (depending on my 'unneccesary' spending for that month) - so I disagree that it will be more difficult to save once I have a car. I have factored in petrol, MOTs, Tax, etc and I am confident that I can afford it without the use of a credit card. By getting a credit card my goals would be to pay less interest on my insurance, and to build my credit history. After that, I would try to use it to keep it active - and that's about it. But maybe it is just a slippery slope...

I don't know how to multi quote, but thanks to everyone for your advice - it has been really helpful, especially Tixy - you explained everything really clearly, thank you

My worry about waiting the four months until I have saved up enough for the insurance myself is that my driving will become rusty, and since I have spent in excess of £2000 to learn to drive, I really ought to get going.

I don't know, I shall ponder what everyone has said and hopefully (!) make a good decision. Thanks again to everyone that responded:)