Can I Get a Credit Card While on a Debt Management Plan (DMP)?

Understanding if you can get a credit card while on a Debt Management Plan (DMP) is an important question. You’re not alone in asking this.

Every month, over 170,000 people come to us for advice on debt solutions. We know how it feels to worry about whether a new credit card can affect your DMP and we’re here to guide you.

In this article, we’ll cover:

• What a Debt Management Plan is and how it works.
• How to know if you qualify for a DMP.
• How your current credit cards can be affected by a DMP.
• If your spending habits are watched by your creditors.
• If getting a credit card while on a DMP is a good idea.

We have a team with a deep understanding of debt matters, as some of us have even been through similar situations and know how you feel

Let’s dive into the topic and help you make an informed decision about getting a credit card while on a DMP.

Will I be Approved for New Credit Cards While I’m on a Debt Management Plan? 

Whether you get approved for a new credit card while on a DMP depends on several things.

For instance, you are dealing with your debt and therefore your credit score should improve over time.

A potential creditor might view this positively, but each lender has their own lending policies. For example, some lenders might let you make deposits to your savings account while on a DMP, whereas others might demand payment to any outstanding debt you have first.

If you are a student, Debt Management Plans won’t stop you from getting a government-backed student loan since they don’t check credit reports or credit history to assess who qualifies. 

However, lenders will check your credit file.

As such, I suggest you seek advice from a debt expert first.

See this message posted on a popular online forum about a debt management plan.

Source: Moneysavingexpert

Points to keep in mind while looking to Open a New Credit on a Debt Management Plan

Acquiring a credit card while on a DMP is a high-risk decision that requires careful consideration.

For the most part, it isn’t advisable.

I suggest you consider the following before getting a credit card when you’re on a DMP:

• Are you experiencing difficulty making your current instalments on time?

• Would adding more debt while you’re trying to pay off your old debt warrant further getting more credit? 

• Will your creditors see that you getting more into debt? 

Will my already existing credit cards get shut down on a DMP?

First things first, if your DMP contains any credit cards under its working mandate, they will be closed.

Here’s the way it works — the creditor, which is normally a bank or other lender sets up a DMP. You could incur fewer charges on your credit accounts. 

Fewer fees and charges are mutually beneficial for you and the creditor. You pay lower rates making it simpler to pay your balance.

Plus, the creditor gets paid.

However, one of the conditions for offering a lower loan rate is that you cancel your credit cards.

Remember – the provider who regulates your debt management plan can only request you cancel your credit cards in the first instance.

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What does it mean to have a credit card on a DMP and can I be sensible about it?

Getting a credit card means acquiring credit. In short, having a credit card on a DMP means acquiring further credit upon debt. 

Let’s say you buy a vehicle that you need for your work while you are on a DMP. You’ll pay higher interest rates because of the DMP.

You should consider buying a less expensive vehicle. For example, a low-mileage vehicle that’s cheaper to run.

The impact of DMP on lifestyle means managing finances more carefully.

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Some debt solutions have fees and may negatively affect your credit rating. MoneyNerd may receive a fee if you go ahead with a debt solution through The Debt Advice Service. For free, impartial guidance and help finding free debt advice, visit MoneyHelper.

Wrapping it Up

For some individuals, a debt management plan is an option worth considering when struggling with debt.

Using a credit card while a DMP is in place may lead to further financial hardship.

A DMP provider may let you keep a credit card for emergency use only, but it’s at their discretion whether to leave the card out of the agreement.

I suggest you seek advice from a debt adviser if you’re considering applying for a new credit card while a DMP is in place.