SHOPPERS have been warned against using a credit card that starts charging interest from the moment you make any purchases.
Level is a “credit builder” card, which is supposed to help the most hard-up get their finances back on track – but it could be taking them down a worse path.
The card is aimed at people with a poor credit score.
Having a good credit score helps you get access to the best rates on products such as credit cards, loans and mortgages – and makes it more likely you application will be accepted.
While there is no credit blacklist which bans people from any sort of borrowing at all, if you have struggled in the past you may find some lenders won't consider you.
But as well as following simple tips like always meeting minimum repayments and making sure you're on the electoral roll, you can improve your rating with a product such as credit-builder credit card.
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Like a traditional credit card, this type of card gives you a spending limit in case you want to delay the cost of purchases.
But the amount you can borrow is often lower than with other cards and the interest rates are higher. As with any form of debt, it should only be a last resort if you really need to borrow.
Typically with a credit card, if you clear your balance in full each month, you won't be charged any interest. Used in this way, they can be a great way to improve your credit rating.
But lender Level is a bit different – it charges interest from the minute you make a purchase, unless you set the card up in a certain way to be repaid in full every month.
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Debt expert, Sara Williams who writes the Debt Camel blog says that shoppers should be very wary.
"I usually say there is not much difference between credit builder cards," she explained in a recent warning.
"What matters is how you use the card. But I suggest you should avoid the Level card."
The biggest problem with the card according to Sara is that even if shoppers manage to pay off their balance in full within the usual 28 day period, they will STILL be charged interest on purchases.
According to Level: "If you pay your balance off in full by recurring payment on the First Payment Date, interest will not be added to your account.
"If you do not pay your Minimum Payment Amount in full by the payment due date each month we will charge interest on the unpaid part of your interest."
What does that mean?
Most credit cards give you an interest-free "grace period" after you've made a purchase as long as you pay off your balance in full.
But Level will only give you a grace period if you agree in advance to ALWAYS clearing your balance in full by giving it a Continuous Payment Authority (where it can request the amount from your bank each month).
Sara said: "Many people will be reluctant to do this as they can't be sure they could always afford the repayments in full – and many people dislike CPAs and would prefer a direct debit."
So, if you're confident you will always be able to clear your balance in full, then you may still be able to use the Level credit card in the same way you would use other cards.
But those who may not be able to pay off their borrowing in full each month, or who don't like the idea of a CPA may be better off choosing another card.
The Sun has asked Level for a comment.
What are the alternatives?
You can use a balance transfer to clear balances on old cards and repay credit card debt interest-free for a set period.
And even getting on the electoral roll can help lenders verify your name and address for credit checks.
Something as simple as paying your bills on time shows lenders that you are a reliable borrower and ultimately boosts your credit score too.
Martin Lewis' MoneySavingExpert reveals which cards you SHOULD try to rebuild your credit as well.
The money experts say that the Capital One Classic Complete is top of the pile.
It's got six months 0% interest on spending, meanwhile Amazon's Classic card has three months 0% on spending, but you get a £20 Amazon voucher on acceptance.
It's worth comparing to find the right perks for you.
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