Credit cards for the unemployed

Can I get a credit card if I am unemployed?

A number of lenders offer credit cards to people without a job or who are currently unemployed. Lenders know that sometimes being without an income is temporary and during the COVID-19 lockdown many people have had to look for alternative employment because they have lost their job.

One of the consequences of the pandemic is that people have struggled to keep their finances on track. If this has happened to you, and you have experienced arrears or difficulties in repaying credit, this does not exclude you from credit card offers. However, you should be wary of taking on more credit if you are already in financial difficulty.

Credit cards for bad or poor credit and those who are unemployed are possible to get hold of, although the interest rates they charge tend to be higher than traditional credit cards.

Should I get a credit card if I face unemployment?

The decision to apply for a credit card if you have lost your job or know you are going to be unemployed depends on your personal circumstances.

Credit cards for unemployed people, those on low incomes and people with poor or bad credit histories are possible to get hold of, but they often come at a bigger cost.

The good news is that there are more credit cards for the unemployed – as well as those with limited and bad credit histories – than ever before.

However, before you apply for an unemployment credit card, think about how you will use it and why you need it. Credit cards are a simple way to borrow money but the amount you spend on your card will need to be paid back. If you do not pay back the minimum amount each month you will start to pay a lot of interest and fees on the money you owe.

Also, even if you pay off the minimum amount each month, you will still be paying interest, which mounts up over time. Therefore, although credit cards can be a useful tool to enable you to make large purchases and spread the repayment, make sure you do have a plan for paying off the money. Do not take on more debt if you are not coping with your existing debt or repayments. Instead, think about repaying your existing debt first.

Find out How to pay off credit card debt with our Uswitch guide.

Consider why you need a credit card – if it is because you are struggling to pay for essentials or you are having cashflow problems then it is better not to take on more debt. Instead, you can find help with a debt charity like National Debtline or StepChange Debt Charity, who can advise you on how to budget and reduce your costs so you do not get into a spiral of debt. Both of these services are free and you should not ever have to pay for debt advice.

Use our Credit card calculator to work out how to pay off your credit card

How do I get a credit card for the unemployed?

Credit card providers have been keen to make their products more readily available and adaptable to consumers’ circumstances.

In the past credit cards were purely for those with regular incomes and unblemished credit histories, but bad-credit and credit builder cards are now available for people who might not be eligible for a traditional credit card.

There are lots of reasons why you might be unemployed. It might be due to a career change, a company restructuring, redundancy or illness. COVID-19 has meant that many people have been furloughed or lost their jobs.

Everyone’s personal financial circumstances are different, and therefore there is no one single credit card for someone who is unemployed, on a low income, or who has a bad credit history.

Instead, your application for an unemployed credit card will be taken on the information that you provide to the lender, and your credit history.

What help can I get with my credit card if I am unemployed due to COVID-19?

The coronavirus pandemic has had a big effect on the economy. Many people have been furloughed, switched to working part-time, been made redundant, or found that their business has been adversely affected by lockdown and social distancing.

Lenders like credit card companies and mortgage companies recognise that this has been a difficult time for many people in terms of their personal finances. They can provide payment holidays if you are struggling to keep up repayments. The best option is to talk to your card or loan provider as soon as you experience financial difficulty, rather than waiting until things get worse. 

Your lender should be able to help you and discuss what options are available in terms of coronavirus help. The good news is, if you do need to take a payment holiday as a result of COVID-19 this will not adversely affect your credit rating.

Which is the best credit card for unemployed people?

There are a number of credit cards designed to meet the requirements of the self-employed and those with uncertain or fluctuating income – such as those on zero-hour contracts.

The good news is that you will be able to choose from different options, depending on the situation around your personal finances.

However, you may struggle to get approved for a credit card if you have no income at all.

When you apply for an unemployed credit card, it is worth shopping around and carefully checking each provider's terms and conditions. This will minimise the risk of damaging your credit history by getting rejected.

If you’re new to credit, then have a look at our guide to first credit cards and learn more about what goes into your credit history file.

Credit card providers have been keen to make their products more readily available and adaptable to consumers’ circumstances.

In the past credit cards were purely for those with regular incomes and unblemished credit histories, but bad-credit and credit builder.

How do I get accepted for an unemployment credit card?

It is worth shopping around and carefully checking each provider's terms and conditions to minimise the risk of damaging your credit history by getting rejected.

If you’re new to credit, then have a look at our guide to first credit cards and learn more about what goes into your credit history file.

You may be able to improve you chances of being accepted by taking a number of simple steps to improve your credit rating before you make your credit card application.

What low-income and unemployed credit cards are available?

If you have a poor credit history, or you're on a consistently low income, there are a number of credit cards on the market, which might help you manage your money and build a good credit rating.

Bad or poor credit rating credit cards

If you have struggled with your finances in the past, taking out a bad credit credit card can help you to build your credit rating.

It can also help you spread the cost of large purchases. These cards are available from a number of lenders but do tend to carry higher charges. You are also likely to be offered a lower credit limit than on a traditional credit card. 

You also need to think about how you will manage your money, so that you don't end up in debt again that you cannot repay. Make sure you have a plan in place to repay before you apply for a bad credit credit card.

Find out how to compare balance transfer credit cards

Credit builder cards

If you have never had a credit card before and can't show a history of paying bills in your own name, you may not be approved for a new card. Likewise, if you have had a problem with credit in the past, have been in debt you could not repay, or you have been refused credit, then you may also be turned down for a new application for a credit card.

One option to consider if you fall into one of these categories is a credit builder card. It will come with higher charges and a lower credit limit than mainstream cards, but if you use it wisely you could start to rebuild your credit rating.

Read our Uswitch guide on How to improve your credit score and credit rating

What are the pros and cons of credit cards for someone with a bad credit history or a low income?

Many of the bad credit credit cards specify a minimum income requirement of around £10,000 per annum. However, some providers are even willing to consider applicants earning £4,000 over 12 months.

If you're earning above the minimum threshold, that doesn't mean you’re guaranteed to be accepted – only that you meet the requirements for consideration.

Remember, there will be other conditions attached to the application that you’ll need to be aware of, such as how recently you applied for a similar card, if you’ve had any county court judgements (CCJs) or a history of bankruptcy.

Before you consider applying, it’s important to check what the terms are regarding late payment fees, minimum monthly repayments and the APR.

Credit card providers don't like taking risks. So if you don't have a fixed income, you're likely to be hit with higher penalty charges and an above average interest rate, if you don’t keep on top of your finances.

When you start using a credit card, make sure you make payments on time. This will then go towards building a positive credit rating. In time, you will become more likely to be approved for more mainstream credit cards.

Find out How to build credit without a credit card

I have irregular income and an insecure job – what are my credit card options?

If your income is low or fluctuating then you may be able to apply for a balance transfer credit card.

Some balance transfer credit cards on the market will ask that your income is above £10,000 per year. They are less likely to accept people who do not have fixed employment.

Find out more about Balance Transfer Cards with our Uswitch guide.

Ultimately, having some form of regular income is the best way to improve your chances for credit card approval. But there are options for those who aren't in employment right now, and those with changing circumstances and bad credit histories.

If you're in desperate need of credit then you may be better off speaking to your local credit union, which can sometimes provide better rates than the banks and credit card companies. If you're struggling with your finances, you can talk to your credit card or mortgage company and ask for a payment holiday while you get back on track.

Why have I been refused credit?

There are a number of potential reasons for this:

• If you have missed any payments - this could have made a mark on your credit report and make you look unreliable to a potential lender. This could be anything from a loan or credit card repayment, mobile phone contract or missing a mortgage payment.

• You are not registered on your local electoral roll

• You have financial ties to someone with a bad credit history

• You have a lot of potential credit – a lender will also take into account how many bank accounts you have and how much debt you currently hold or credit you could use.  

• You may also be victim of not even having a credit history - good or bad or of identity fraud.

• Many young people struggle to get their first credit card as lenders do not have a financial history to compare.

If you have never owned a credit card before, read our guide to your First Credit card to find out the best way to build your credit rating and use credit wisely.

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