Focus on: Earn 0.5% cashback despite bad credit

Credit cards with perks such as cashback and rewards have traditionally been the preserve of those with excellent credit ratings. But things are changing.

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Capital One’s new Classic Extra credit card offers 0.5% cashback on all purchases as well as an introductory bonus, even if your credit score is not up to scratch.

What’s the deal?

Capital One’s Classic Extra card, one of its Classic range, offers cashback of 0.5% on all purchases. This is applied to your account once a year (in January) as a credit payment. The card also offers an introductory £5 bonus when you open the account. It is only open for applications during May and June 2012.

The Classic Extra does not charge an annual fee and, as well as getting something back from your spend, you qualify for benefits including purchase protection insurance and ID theft assistance.

Any catches?

In terms of cashback alone, this card is far from the top of the tables. American Express Platinum Cashback for example, offers 5% for the first three months and 1.25% thereafter.

But, unlike those leading cashback cards, you don’t need a good credit score to qualify for Capital One’s Classic Extra. However, because of the cashback element, the card imposes slightly stricter criteria in terms of credit rating than the rest of the Classic range.

Because the card is available for those who want to build up their credit score, it comes with a high Annual Percentage Rate (APR) of 34.9% (variable). This compares to an average APR of 17.31% according to Bank of England figures. However, the good news is, the 34.9% applies to all accepted applicants as opposed to being a representative APR that only needs to be offered to 51% of successful applicants. In other words, 34.9% is as bad as it’s going to get.

Credit limits on the card are also capped to mirror than less-than-perfect credit status of its applicants. The maximum you will be offered is £1,500 but – depending on your particular score – it could be as little as £200.

What’s the verdict?

If you are looking to build up your credit score and can be sure you will pay off this balance every month, the Capital One Classic Extra could offer a great opportunity. After all, no other card allows you to build up your credit rating and earn cashback on purchases at the same time.

But, if you suspect even for a minute that you will not be able to pay back your balance every month, not only will the value of the cashback be lost, you will be whacked with a hefty APR which could cause financial problems and see your credit score deteriorate even further.

In this case, you may be better off applying for Barclaycard’s Initial credit card which, as well as helping to repair your credit score, offers 0% interest on purchases for the first three months.

Alternatively, if you suspect your credit score could withstand an application for a more mainstream cashback card – and you will be sure to pay off the balance – it’s worth applying for one of these instead as the rewards will be greater. You can see what’s available at our cashback credit card channel.

Top tip

Whether it’s cashback or anything else, you will want the best credit card that your personal credit score will allow. However, applying and being rejected could have the effect of damaging your credit score further. By using MoneySupermarket's SmartSearch tool you can carry out a 'dummy application' and find what cards you're likely to be accepted for first, without affecting your credit file.

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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