Challenger bank Tandem has launched a best buy credit card offering those without a perfect credit rating free holiday spending and cash withdrawals.
The Journey Card is the second in the mobile-only bank’s line-up and is designed to help those who have struggled with debt in the past rebuild their credit score.
It is one of few credit builder cards that offers the extra perk. We have taken a look at whether it’s worth signing up.
Made for millennials: Tandem offers eye-catching brightly coloured credit cards to rival the likes of Starling and Monzo
Without a good credit rating it is near impossible to get the best deals on credit cards and loans or get accepted for anything from a mortgage to a mobile phone contract.
Those who haven’t managed to build up a credit rating at all will find it just as hard as those who have a low score after struggling with debts or missed credit card payments.
This can hit youngsters particularly hard, with many struggling to get accepted for their first credit card because they have little or no evidence to show lenders that they will be responsible with their debts.
Credit builder cards are a good bet in this situation. They have lower entry requirements and often accept people with a history of problems debt or no borrowing experience at all.
The flip side is they charge a higher rate of interest for the privilege – cardholders should aim to clear their balance each month to avoid paying interest altogether.
Is it any good?
This is a clever move by Tandem which as a mobile-only bank appeals the most to young tech-savvy customers, plus its beefed-up budgeting features, real-time balance and spending alerts mean it’s ideal for those wanting to stay on top of their debts.
The minimum credit limit is £150 depending on circumstances and borrowers are given the opportunity after four months to increase it.
There are no foreign transaction fees on purchases or cash withdrawals – a real money saver if you travel frequently.
Spending on a typical credit card typically incurs foreign transaction fees of around 3 per cent, withdrawals can then cost an extra 2 to 3 per cent on top.
The card does come with a higher than normal APR at 24.9 per cent and depending on your circumstances it may even be higher – up to 39.9 per cent.
That’s expensive compared to the average card charging 18 or 19 per cent, but it’s fairly low for a credit builder card which typically charge between 25 and 35 per cent.
This is largely because those with lower scores are considered more likely to fail to keep up with repayments.
How does it compare?
There are a handful of companies that offer credit cards geared to those with a lower credit rating: Vanquis, Aquis, Marbles, Capital One, Barclaycard Initial and Tesco Foundation.
Top credit cards for fee-free spending abroad
A sprinkling of these will offer short 0 per cent interest deals on balance transfers or purchases but there is only one deal that also offers free overseas spending.
The Aqua Reward credit card is the only rival deal offering no fees on spending abroad. It also offers 0.5 per cent cashback on your spending.
While the rate you will get will depend on your circumstances it starts with a much higher APR at 34.9 per cent (and can go as high as 59.95 per cent).
That’s 10 per cent higher than Tandem’s best rate.
While Tandem offers fee-free cash withdrawals on the card too, Aqua charges 3 per cent if you withdraw cash overseas and a higher interest rate on the amount from 44.9 per cent to 69.95 per cent.
Overall the Aqua card may offer cashback but it will likely prove far more expensive, particularly if you use it at an ATM abroad.
Make sure you apply for the right card
With a weaker credit rating you want to protect it as much as possible.
Rejections won’t leave a mark on your file but lenders will be able to see if you have made repeated applications for credit in a short space of time so try to apply for a card you are likely to get, or space out your applications.
Using an eligibility checker or smart search tool will help you see which deals you are likely to be accepted for without leaving a mark on your credit file.
Comparison sites such as Money.co.uk, uSwitch, MoneySupermarket, TotallyMoney all have their own versions, as does referencing site, Experian.
> This is Money’s expert partner service MoneySupermarket has its own smart search tool
One from a comparison site or credit scoring tool will bring up a list of suggested cards, with a percentage scoring showing how likely it is you will be accepted by each one.
If you have your eye on a particular lender or deal, MBNA, NatWest, Barclaycard, Capital One and American Express all also have their own eligibility tools.
THIS IS MONEY’S FIVE OF THE BEST CREDIT CARDS