Applying for a new credit card

As a general rule, the lower the interest rate on a credit card, the lower the chance of being accepted. This does not mean that you are going to be declined for the best credit cards with the lowest rate, but it does mean that a card-issuing company may only accept one in five applications, whereas other card issuers may accept as many as four in five.

It's a sweeping statement, but you could argue that credit cards generally fall into three categories. Firstly, you have the exceptionally low interest credit cards with the best interest rates, as mentioned above, and would include offerings such as the Cahoot credit cards.

Next up would be the largest category of cards, which are the rewards scheme products, such as cashback credit cards. These credit cards offer a middle-of-the-road interest rate, but bundle in a rewards program and often some other extras. The best credit cards in the rewards category would include the American Express Blue, the Smile credit card (when held in conjuction with a Smile current acccount) and Nationwide's Cash Reward credit card. As these products have higher APRs than the previous category, credit cards companies are happy offering these to individuals with lower credit scores, as substantial debts on these cards means substantial profits (interest accrued) for the credit card companies. Some of these credit cards, the Barclaycard Platinum for instance, offer lots of 'extras' such as an extended warranty and a rewards scheme (Nectar) but at a relatively low interest rate, resulting in a higher credit score requirement.

The final type of cards are credit-builder or bad credit credit cards, such as the Capital One Classic credit card. Althought lots of marketing paraphenalia is sent to households with the phrase "instant approval credit card" or "pre-approved credit card" included, these types of credit cards for bad credit rated indviduals are probably the only cards that are very easy to obtain, irrespective of credit score. The reason for this is pretty simple: standard APR is 29.9% on the Capital One Classic and it only goes higher with competing cards (credit cards charging APR of 40% are not unheard of).

With these types of credit cards, you need to be very wary of carrying a balance from month-to-month, as these interest rates are pretty horrid. If you have bad credit, then these credit-builder credit cards are useful for rebuilding your credit score (just possessing a credit card improves your credit score over time), so we'd recommend that if you get one, you hold onto it and only use it when you know you will clear your balance in full.

Barclaycard is an interesting credit card company to study for a moment, as they offer as wide a range of cards as possible in an attempt to capture as many of these markets as possible. They do this by a making their best value products, such as their platinum and gold credit cards, available only to people who have a good credit score, while offering various rebrandings of their "Classic" credit cards to entice people with lower credit scores.

Not accepted for a credit card? - Our recommendation on your next steps, including how to check your credit rating.