a “credit builder” card to avoid [updated] · Debt Camel

UPDATE – August 2023 – Zable hikes interest rates for some borrowers

Some people have been told that Zable is increasing their interest rate from 38.9% to 48.9%. The customers were told the rate was being increased to reflect changes in Zable’s assessment of their credit record.
48.9% is now the “representative rate” that Zable quotes – this makes it one of the most expensive credit cards.

If Zable or any other credit card increases your interest rate like this, read Increasing the interest on a credit card – your rights which explains you can reject the change and carry on repaying at the previous rate.

UPDATE – August 2022 – Zable brought in changes to correct the problems highlighted in this article

They have told me:

We are making 2 changes to the feature:

• If a customer had no payment due on their last statement or it is their first statement they will not be charged
• If they have paid their statement balance in full by any means by the end of their selected payment date for the card they won’t be charged on their next statement.

This means they will work like a standard credit card, with the exception that the interest-free period you get will be a comparatively short 35 days as Zable typically has a 5 day gap between a statement and the customer’s selected payment date. Most other credit cards have a longer period than 35 days interest-free.

UPDATE – May 2022 – the Level card changed its name to Zable.

In 2022 a reader asked:

I recently got a Level [now Zable] credit card to try to improve my credit score. I have just found out that I am being charged interest from the date of my purchases. I thought this was illegal?

Zable isn’t a credit card I have come across before. While charging interest like this isn’t illegal, it is very unusual so I have had a look at this.

Zable is a “credit builder” card, aimed at people with a poor credit score. It is a brand of Lendable, who give large high-interest loans.

What normally happens with a credit card

Money Helper in A Simple Guide To Credit Cards says:

if you pay off your outstanding balance in full each month, you won’t pay any interest. 

Citizens Advice says:

If you pay off the whole amount (the balance) owed on the card by the due date, you will not be charged interest on your purchases.

The Zable card makes this complicated

Zable charges interest from the purchase date unless you set the card up to be repaid in full every month using a Continuous Payment Authority (CPA).

But many people who use credit builder cards have uncertain finances.

They may hope to repay the balance in full and so not be charged interest. That is always the best way to use a credit builder card to improve your score.  But they may not feel confident they can do this every month, so they may not want to choose the option to repay in full every month by CPA. Especially as CPAs can be difficult to cancel with your bank.

If they then do pay the statement in full by the due date, they will be charged interest on these purchases. Which they may not expect.

So far as I know, no other credit card does this. If you know of one that does, leave a comment below this article!

Is this clearly explained by Zable?

This isn’t mentioned on the Home page of their website.

Since I originally wrote this article a month ago, the FAQs have been changed to say:

Interest accrues daily against all completed transactions and would stop accruing once the outstanding balance is cleared in full. Any interest accrued in that period is then applied on your statement date.

Please note that we do have a 35 day interest free period for those opting to pay their statement balance in full each month by recurring payment.

To make use of this you would just need to select to pay the ‘statement balance’ in the App and ensure your statement balance is cleared by your repayment date each month or when we attempt to charge the balance on your repayment date.

The “by recurring payment” is a new addition.

This is a minor improvement, but I still don’t think it is good enough. No other cards do this. Many people would not think to read the FAQs as they could reasonably assume they know how a credit card charges interest.

The card T&Cs say:

5.4 How we charge interest
We charge interest on all purchases, cash advances and unpaid interest from the date these transactions are added to your account until they have been repaid in full. Interest is calculated and accrued at the end of each day and is then added to your account once a month on the date we produce your statement. If you pay your statement balance 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.

That is clear. But how many people look at the T&Cs in detail?

This needs a Red Hand

Lord Denning, who has been called “probably the greatest English judge of modern times”, said:

“the more unreasonable a clause is, the greater the notice which must be given of it. Some clauses I have seen would need to be printed in red ink on the face of the document with a red hand pointing to it before the notice could be held to be sufficient.”

I don’t think it is “clear” or “transparent” to charge interest in an unusual way that no-one would expect.

This should be highlighted on Zable’s home page. No one should have to read the small print or the FAQs to find it out.

And because the Zable card is aimed at people that may have financial problems, Zable should be extra careful with this. In my opinion, if it wants to charge like this, it should explain that other credit cards do not do this.

Makes interest rate comparisons impossible

If you are choosing which credit card to apply for, you could look at a comparison site. Or at the advertising in credit reports such as Clear Score.

Then you will see the representative APRs. Of course you may not get that rate, but all lenders have to say what the APR of their loans or credit cards are is in order to let you make comparisons.

But these comparisons aren’t effective unless the interest calculation method is the same. The way Zable calculates interest means its customers may sometimes pay more interest than they would with a different credit card at the same APR.

Comments on this article are now closed as Zable has brought the card into line with other cards. 

Card or catalogue limit too high?

Refunds from Lendable & other loans

Can you get an overdraft refund?