Credit builder credit cards
A credit builder card can help to show future lenders that you are able to manage your credit wisely and promptly repay debts. Over time this can improve your credit rating, which may then allow you to move more easily into other areas of borrowing and access better deals.
How do credit builder cards work?
Credit builder credit cards work in the same way as other types of card. When you spend using your card you are borrowing money from the credit card issuer. At the end of the month you will receive a statement detailing your transactions, at which point you will need to pay off at least the minimum required, or you may face heavy charges.
If you spend only a small amount each month on the card that you're sure you can pay off in full at the end of each month, this can help improve your credit record, and help show future potential lenders that you're a reliable borrower.
If you don’t pay off the full amount each month you could further damage your credit record, and the interest rate charged on any outstanding amount can be high.
The monthly credit limit on this type of card will usually be lower than that on other credit cards, often around £500 per month. If you exceed this amount or build up debt on your card you may do further damage to your credit rating.
You should always shop around to find the best card for your needs.
If you find yourself struggling with debt there are a number of debt charities that offer free advice to help you.
Last updated: 31 May 2015