The cost-of-living crisis has driven a huge increase in credit card usage, with last year seeing the fastest rise in borrowing in 17 years.
Borrowing to meet basic needs and expenses is dangerous, particularly on credit cards with high interest rates. However, our plastic friends can be a useful money-saving tool if you use them wisely. They can help you to budget, protect you against problems and spread the cost of purchases over time.
They can also improve your credit rating, by providing evidence that you are the kind of person who can borrow money and pay it back on time.
Saying this, the credit card market can feel like a bit of a jungle! From providers hiking limits without asking to the UK’s growing consumer debt pile amid a cost of living crisis, they don’t exactly scream ethics. Many will also have concerns about choosing a card from a big bank where lending practices are questionable.
In this difficult market, here are five of the more ethical cards to consider.
Nationwide is one of the UK’s most established building societies. This means that, unlike a bank, it is not listed on the stock market and accountable to shareholders. Instead, it is accountable to its members – ie. the people who bank with it – and they have a say in how it is run.
The mutual changed its terms and conditions in 2016 to rule out automatic increases in credit limits, and doesn’t remove promotional deals if a user misses a payment.
Nationwide’s credit card comes with worldwide commission-free purchases and no annual fee.
Introductory offers: The card comes with two offers; 0 per cent interest for 18 months on balance transfers and 0 per cent on purchases for three months; or 0 per cent interest on balance transfers for 15 months and 0 per cent on purchases for 15 months. A 1.5 per cent balance transfer fee applies for the first 90 days, after that it’s 2.4 per cent (with a minimum charge of £5). You must be a Nationwide current account holder to apply for its credit card.
Interest rate: 19.9 per cent.
With 1p back for every £2 you spend in the Co-op food stores and 1p for every £3.33 spent everywhere else with a Visa symbol, this fee-free card (only available to Co-operative members) offers rewards and incentivises you to shop with the mutual, which has ethical sourcing policies.
However, the Co-operative Bank is no longer owned by the Co-operative Group. In 2017 it was rescued by international hedge funds, which continue to proclaim it as an ethical bank. For many though, the sale put a question mark over the integrity of its ethical policy.
The Co-operative credit card has a 2.75 per cent fee for purchases abroad.
Introductory offers: None, although there are also no balance transfer fees. Bear in mind that you cannot transfer a balance from another Co-operative or Smile credit card.
Interest rate: 18.2 per cent.
Smile’s fee-free Classic credit card comes with 0.25 per cent cashback on all spending. Smile is owned by the Co-operative Bank, and shares its Ethical Policy.
Introductory offers: None, although there are also no balance transfer fees.
Interest rate: 19.9 per cent if you have a Smile current account, 23.9 per cent if you don’t.
A challenger bank without the legacy issues of some of the larger players, Metro Bank is (so far) unencumbered by some of the scandals that have plagued the likes of the Co-op. It also promises to print your credit card while you wait.
There’s no cashback and it offers one single, low rate of 14.9 per cent. However, the card is free to use in Europe, which may sweeten the deal, particularly if you are a regular traveller.
Introductory offers: None.
Interest rate: 14.9 per cent.
Tymit is slightly different to the other credit cards here, as it lets you spread the cost of your card purchases over a number of fixed monthly instalments. Any balance that is not paid off at the end of the month can be split into 3, 6, 12, 24 or 36 equal payments.
Tymit says it is helping customers to say goodbye to the “minimum payment trap, confusing interest charges and hidden fees” that often apply to standard credit cards.
As an app-based lender, Tymit doesn’t currently make large corporate loans and therefore doesn’t invest in harmful industries such as fossil fuels.
Introductory offers: There are no introductory offers but Tymit offers 0 per cent interest on purchases paid within three months. It also does not charge compound interest (which is where you pay interest on interest – this can be very costly if you don’t pay your balance off each month).
Interest rate: 22.9 per cent.
Paying off credit cards
If you’re looking to get on top of credit card balances, especially if you have more than one card, you could try a credit card management app like Cardeo. The free app has a credit card calculator, which shows you how to pay off your balances in the cheapest and quickest way possible.
For your complete guide to the best ethical and sustainable investment funds available to UK investors, see the latest Good Investment Review, produced in partnership with Square Mile Research and The Big Exchange.
If you’d like to find out more about the above providers, a Which? membership gives you access to in-depth, expert reviews, ‘Best Buys’ and ‘Don’t Buys.’
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