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Credit Cards | Your Credit Card questions answered

What should I know when taking out a credit card

What is a credit card?

Credit cards are another means of obtaining credit. Credit cards let you choose how much you borrow and how quickly or slowly you pay back the loan.

Compared with most other forms of borrowing, credit cards are very convenient. Although you may pay for this convenience, as credit cards can charge a high APR. Once you have a card, you simply use it to pay for goods and services without having to request a new loan each time.

What is the difference between a credit card, a store card, and a debit card?

Store cards work like very much like a credit card, with a few exceptions:
  • The interest rate is usually higher than credit cards
  • You can use them to buy things only in certain shops
  • You may qualify for special offers, such as discounts and late shopping nights.


  • A debit card, however, is entirely different. Rather than lending you money, spending on a debit card is like using cash. Any money spent on a debit card is immediately deducted out of your bank account.

    What are the main types of credit card and what's the difference between them?

    The most common card types are Mastercard, Visa, and Amex (American Express), Mastercard and Visa are accepted in the most shops around the UK.

    How do the credit card companies charge me?

    You will receive a statement each month showing what you have borrowed using your credit card. This is made up of your purchases made during the last month using the card, any balance carried forward from the previous month and any interest charged.

    If you pay off the whole amount you owe, there will be no interest charge. So credit cards can give you interest free credit for a few weeks, usually 4-5 weeks.

    If you do not pay off the full amount, you are charged interest on the whole amount. Different cards work in different ways, so interest might be charged from the statement date or from the date of each purchase.

    You must pay off at least a minimum amount each month; this is normally around 5 or 3% of the balance, whichever is greater. If you miss a payment, there is likely to be penalty charge. So make sure you pay at least the minimum payment.

    Some cards charge an annual fee for use of their credit card.

    What are the risks of using a credit card?

    Although credit cards can be a convenient and cheap way to borrow for a short period (as long the full balance is paid off each month), they are usually an expensive way to borrow over the long-term.

    Also, because credit cards are so convenient and easy to use, there is maybe a risk of creating debts that you cannot afford to pay back.

    Credit cards are a very good tool to help you manage your immediate finances, but you should always keep track of your expenditure and make sure you repay the debts you create through using them over as short a period as possible.

    What are the main differences in the cards available?

    All major cards offer different types of incentives, interest rates, and fee structures because they recognise that their customers use credit cards in a variety of different ways.