Luma 0% credit card improves your credit rating
The new credit builder card from Luma will not only held you build a decent credit record - it also offers 0% on purchases for three months.
As a nation we’re becoming more and more reliant on using credit cards and the new credit builder card from Luma gives you the opportunity to borrow money free of interest while at the same time repairing your credit history.
The Luma card
Luma, in partnership with Capital One, has launched the Luma credit card. It’s available to almost anyone and is aimed at those customers with a poor, or non-existent, credit history.
The maximum credit available is £1,500 and even if you’re a Capital One customer already, you can still apply.
The card even offers 0% interest on purchases for the first three months, an incredibly rare proposition when it comes to cards for borrowers with poor or no credit history. That means that if you've got a larger than usual purchase on the horizon - a new fridge perhaps - then you can spread the payments without paying interest on top.
The catch
As with most cards of this kind, the interest rate is higher than the average. At 35.9% you can expect steep repayments if you don't pay your balance off in full each month.
The rate is set like this to encourage people not to rack up excessive amounts of debt and as the credit limit is relatively low, the repayments shouldn’t be too punishing.
The plus side is if you repay what you spend each month you won’t have to pay anything and it’s still going to be cheaper than using a payday loan.
How does it compare to the rest of the market?
Credit cards have all sorts of selling points, whether it's cashback, rewards, balance transfers or just general spending.
When it comes to credit builder cards, there are a few main players listed below and our comparison tables will give you a full range of the market. Here are the other cards worth a look.
|
Card |
Interest rate |
Max credit limit |
Extra information |
| Capital One Visa Card | 28.9% | £1,500 | Unlikely to be accepted without some form of UK credit history. |
| Vanquis Bank Aquis Card | 29.8% | £1,000 | Must be at least 18, UK resident and not bankrupt. |
|
29.9% |
£1,200 |
Suitable even if you have had CCJs or missed credit payments in the past 12 months. |
|
|
32.9% |
£1,600 |
Must be at least 18 and a UK resident. |
|
| Aqua Reward Mastercard | 34.9% | £1,600 | Must be at least 18 and a UK resident. Pays flat rate of 3% cashback. |
As you can see there are a number of cards that offer smaller interest rates, with three boasting sub-30% rates. However, if you want an additional feature with your credit builder card, such as the 0% purchase period on offer from Luma or the 3% cashback on offer from the Aqua Reward card, then you will need to accept a higher interest rate. For more on the Aqua card, check out Aqua Reward credit builder credit card offers 3% cashback.
Cleaning up your credit record
Lenders look at your credit record when deciding whether to grant you credit or not. And since the credit crunch, they are pretty stringent when running the rule over new customers.
In fact, to have any chance of getting hold of one of the most competitive credit cards you need to have a squeaky clean record.
A bad credit history can result from a number of things, but missed payments, a low income, being self-employed or being a student can all lead to a less than perfect credit score. The good news is there are lots of ways to build up a credit history. Check out How to build an excellent credit history.
The best way to use a credit builder card
Instead of missing payments or heading into the dodgy world of payday loans, credit builder cards are a lifeline for people who have been rejected elsewhere.
The only way they can work efficiently though is by the borrower showing some restraint and clearing the balance each month. If you do this and make sure all payments are made in time, the card will help you get your credit history back on track – which will enable you to apply for more competitive cards with lower interest rates and can even even help you get on the property ladder.
A good way to make the most of the card is to use it for all your normal spending, be it food, petrol or clothing. Then each month set up a direct debit to pay the balance off directly from your bank account. This way you can show the lender you’re borrowing efficiently, so your credit score will improve, without spending anything extra than you would in a normal month.
Compare credit builder credit cards
More on credit and cards
How to build an excellent credit history
How to repair your credit rating
Best credit cards for bad credit borrowers
The best money transfer credit cards
Where to get free debt advice
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