Should I Get A Credit Card?
Discussion
A bit of background: I'm 28, live by myself (rented property) and aside from student loan and overdraft have no debts, store cars, loans etc. I've never taken out a credit card until now, mainly because I was worried I wouldn't trust myself.
Lately though I've been struggling financially, I found a temp job but was put on the wrong tax code which meant I was living on £90 a week after rent. Once you include food, petrol etc it's enough to live on but no backup in case something goes wrong. Now I'm really worrying about the long term and how I'll ever afford my own house or a decent pension. Having been at uni, never had a high paid job and living abroad, I've never built up any savings. Being honest, living on such means is starting to get me down.
I have had my code changed and am due a tax rebate which will be a massive boost, but this could take months. In the meantime, my car failed its MOT and since I have no emergency fund I'm not sure where the money will come from to fix it. One idea would be to finally take out a credit card. I've signed up for one of those free credit reports, but haven't received it yet. It might be rather confusing due to my addresses.
I lived with my parents in one place for 17 years but since then I must have lived 12 different rented properties, including back with parents for 2 brief periods. My bank details are still at their place and I took out a phone contract using their address. If I did apply am I doing anything illegal in applying at their address? Reason being the credit rating will likely be far better. No idea where I am on the electoral register but I don't think I ever changed it after moving out.
Lately though I've been struggling financially, I found a temp job but was put on the wrong tax code which meant I was living on £90 a week after rent. Once you include food, petrol etc it's enough to live on but no backup in case something goes wrong. Now I'm really worrying about the long term and how I'll ever afford my own house or a decent pension. Having been at uni, never had a high paid job and living abroad, I've never built up any savings. Being honest, living on such means is starting to get me down.
I have had my code changed and am due a tax rebate which will be a massive boost, but this could take months. In the meantime, my car failed its MOT and since I have no emergency fund I'm not sure where the money will come from to fix it. One idea would be to finally take out a credit card. I've signed up for one of those free credit reports, but haven't received it yet. It might be rather confusing due to my addresses.
I lived with my parents in one place for 17 years but since then I must have lived 12 different rented properties, including back with parents for 2 brief periods. My bank details are still at their place and I took out a phone contract using their address. If I did apply am I doing anything illegal in applying at their address? Reason being the credit rating will likely be far better. No idea where I am on the electoral register but I don't think I ever changed it after moving out.
Don't use a credit card as a short term boost of income if you do not have a long term plan for increased, steady income to repay it. You could quickly owe more than you can pay off in a reasonable period when the interest is taken into consideration.
You should use your own address when connected with anything financial.
You should use your own address when connected with anything financial.
My eldest daughter lives in rented accommodation so I keep her on the electoral roll at our primary address.
My middle daughter owns a house with her soon to be husband so I insist she be put on the electoral roll at that address.
It is imperative that you are on an electoral roll. You need to clarify your status as a lender may well reject your application if addresses do not match.
My middle daughter owns a house with her soon to be husband so I insist she be put on the electoral roll at that address.
It is imperative that you are on an electoral roll. You need to clarify your status as a lender may well reject your application if addresses do not match.
If you have to borrow money then get a loan, not a credit card.
The loan will have a lower interest rate than a credit card (ignoring credit card 0% deals) so will save you money.
The loan will have a defined term, so it WILL be over after a finite duration, unlike a revolving product like a credit card or overdraft which would sit there until you made 'overpayments' to clear it.
The loan will have sensible sized repayments, so you're actually clearing capital, not just barely paying the interest as you would be on a credit card.
The loan will not allow you to 'creep' up the value, as it's a one time lump which you'll have to live within, unlike a credit card where it's all too easy to rack up a big debt.
Honestly, the only time I'd recommend a credit card is if you want some buyer protection and you plan to setup a direct debit to repay the full balance each month. Your desciption of your situation does not fit this profile, you're just trying to make ends meet in the short term, so a 12m loan of a couple of grand would probably be the best option IMO. (Note, DO NOT BORROW MORE THAN YOU NEED! I.e. don't get 'extra' for a holiday, new car, buying stuff you don't need etc, as you'll regret it when you're sat on a pile of 2nd hand stuff with a big debt to pay.)
HTH
The loan will have a lower interest rate than a credit card (ignoring credit card 0% deals) so will save you money.
The loan will have a defined term, so it WILL be over after a finite duration, unlike a revolving product like a credit card or overdraft which would sit there until you made 'overpayments' to clear it.
The loan will have sensible sized repayments, so you're actually clearing capital, not just barely paying the interest as you would be on a credit card.
The loan will not allow you to 'creep' up the value, as it's a one time lump which you'll have to live within, unlike a credit card where it's all too easy to rack up a big debt.
Honestly, the only time I'd recommend a credit card is if you want some buyer protection and you plan to setup a direct debit to repay the full balance each month. Your desciption of your situation does not fit this profile, you're just trying to make ends meet in the short term, so a 12m loan of a couple of grand would probably be the best option IMO. (Note, DO NOT BORROW MORE THAN YOU NEED! I.e. don't get 'extra' for a holiday, new car, buying stuff you don't need etc, as you'll regret it when you're sat on a pile of 2nd hand stuff with a big debt to pay.)
HTH
Negative Creep said:
Thanks for the replies. Or to put it another way, what if I got something with a very low credit limit (say £250), used it to pay for the MOT, pay the balance off within 30 days (wouldn't have a problem doing that) then put it to the back of my wallet for emergencies?
Only if you set up the direct debit to pay the full balance to avoid the temptation to not pay it all. Also instruct the bank explicitly NOT to increase you limit without you asking. (That's another trick, they used to put it up and up and up if you were allowing a balance to sit unpaid. I don't think they are allowed to do that anymore though.)Negative Creep said:
used it to pay for the MOT, pay the balance off within 30 days
Is your car Essential? Can you wait and save for 30 days and pay cash?I know it's PH but running a car is unbelievably expensive at the moment (insurance, fuel etc) and I would give it up if money is tight.
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