Some credit cards specifically target borrowers who wish rebuild their credit rating, but these offerings normally come with sky-high annual percentage rates (APRs) - some as high as
39.9%.
Capital One this week re-launched its Progress card, which provides cardholders with the opportunity to reduce the interest rate they pay on the card, as well as improving their credit score. We take a look at how it works...
What's the deal?
Aimed at those who wish to improve their credit rating, the Capital One Progress card offers an initial APR of 29.9%.
While the interest charged is high, the biggest advantage of this card is that you can considerably reduce the APR after each six-month period that you have the card, provided you stay within your credit limit and keep up to date with repayments.
If you are able to do this, then after six months the rate will reduce to 27.9%, after 12 months to 25.9% and after 18 months to 23.9%. If you stick with the card for three years and keep up with your repayments then you could reduce your rate to a much more acceptable 17.9% APR.
If you do miss a payment or edge over your credit limit, Capital One won't increase your rate and you can still qualify for the next rate reduction as long as good conduct returns to the account.
Any catches?
Capital One makes it clear that this card is aimed at those with a 'good' credit history and who are used to managing credit. If you have had any CCJs or defaults in the last 12 months then it's likely that you won't qualify for this deal.
The same stumbling block applies for those who have never held credit in the UK before, so clearly this is targeted at those who haven't qualified for a market-leading deal but who have borrowed in the past.
There are no 0% offerings on the card so purchases, balance transfers and cash withdrawals are all set at the same rate of interest. You should avoid taking out cash with the card as you will be charged an additional 3% of the amount withdrawn, this fee is set at a minimum of £3.
Verdict
It is becoming increasingly difficult to obtain market-leading deals with a less-than-perfect credit history so this card may well be a good alternative if you have been turned down elsewhere.
You may not be accepted for this card if this is your first time at trying to obtain credit therefore you may want to take a look at the Barclaycard Initial, which is aimed at those with a limited credit history.
If you meet Capital One's criteria and want to make your credit record look more attractive then the Progress card is a good start in improving that all important score.
Top tip
The initial rate of 29.9% is steep and, as with all credit cards, it's not advisable to keep an outstanding balance on a card that is charging you interest.
You are more than likely to improve your credit score by keeping a small balance or no balance on the card and you should therefore use it to make small purchases that you know you will be able to pay off at the end of the month. By doing this, you will avoid any interest charges and you will also prove your credit worthiness by paying the balance off in full and on time.
Please note: Any rates or deals mentioned in this article were available at the time of writing. Click on a highlighted product and apply direct.
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