10 things you need to know about credit cards


APR stands for annual percentage rate. This tells you how much interest you will be charged on your credit card debts each year. Many credit card companies like to show a monthly interest rate, but for comparison and simplicity they have to show the annual rate. This involves a compounding effect (showing the interest paid on the interest from previous months).

Find the best credit card for you

So, for example, a credit card charging 2% interest a month would have an APR of 26.82%. This means if you had a balance of £1,000 on a card you would have to pay £20 interest a month.

One final thing to be aware of with APR is that you won’t necessarily get the rate you see advertised when you apply for a credit card. Credit card providers only have to give the advertised APR to 51% of applicants, so if you have a speckled credit history you may be offered a higher APR.


This is the amount you will be charged to move a balance from one credit card onto another. The amount usually takes the form of a percentage of the amount being transferred - typically around 2.8%.

At present, there is a lot of competition in the market with firms bringing out longer and longer 0% interest periods, but make sure to weigh up the balance transfer fee against this 0% period. A 27-month interest free deal may sound great, but the 3% balance transfer fee is very high.

The best bet is to work out – realistically – how long it will take you to clear your debt and choose a card accordingly, as the cards with shorter 0% periods tend to have lower balance transfer fees.

How to do a 0% balance transfer


These are very similar to balance transfer fees but instead of being a charge on money moved from one credit card to another, they are a charge on moving money from your credit card into a bank account. These charges tend to be higher than balance transfer fees - around 4% in most cases.


If you don’t make the minimum payment on your credit card by the time stipulated on your bill you will be subject to a late payment fee. These have been largely standardised across the industry at a £12 one-off fee.

That may not sound much, but remember that frequent late payments can affect your credit rating and could make your credit card provider reassess your creditworthiness, leading it to reduce your credit card limit and even increase the interest rate on your card.


The minimum repayment is the very least you must repay on your debt each month. Fail to pay it and you’ll accrue late payment charges and run the risk of damaging your credit rating.

The amount is usually the greater of either a percentage of your debt or a fixed sum so, for example, it could be 3% or £5. It is always better to pay a set amount each month rather than a percentage, as with the latter, the amount will decrease as your debt decreases. So if you had a credit card debt of £500 with an APR of 17% and only repaid the minimum payment of 3% each month, it would take you nine years to clear the debt and cost you £309 in interest.

However, if you paid off £15 a month (3% of the initial £500), it would take you three years and nine months to clear the debt and save you £146 in interest.


Most people head abroad and spend money in exactly the same way as they do at home - on plastic. But while this may be the easiest option, it can work out costly thanks to foreign usage charges.

Most providers will charge you a set fee of as much as 3% every time you use your card abroad. If you want to use your credit card on holiday, find one that doesn’t charge a foreign usage cost.

Don't rely on plastic to keep you afloat abroad


Many of us use our credit cards as a free borrowing facility by paying off the balance in full each month before interest starts being accrued. For this to work faultlessly you need to be aware of how long you’ve got between buying something and interest starting to accrue on that debt.

The interest-free period varies between providers, but can be anything up to 56 days – unless you withdraw cash with your card, when interest is charged immediately. Also, if you don’t clear your balance in full one month, check when the interest is calculated from.

Some providers will backdate it to the date of sale, whereas others will simply start charging interest from the 57th day.


Yes, you can stick your credit card in an ATM and withdraw a load of cash - but you really shouldn’t. Any cash you withdraw is usually liable to a much higher interest rate than the headline purchase rate.


One of the big benefits of your credit card is the additional consumer protection you receive. Under Section 75 of the Consumer Credit Act 1974, the credit card company is “jointly and severally liable” for any breach of contract or misrepresentation by the retailer.

So if things go wrong you can claim a refund from your card provider for anything over £100 but less than £30,000. It is also applicable if only part of the payment was on your card (as long as the full cost is no more than £30,000).

For example, if you bought a £5,000 car from a dealer and put the £500 deposit on your credit card while paying the rest by cheque, and the dealer went bust before you took delivery of the car, you could claim the full £5,000 back.


When you apply for a credit card, the company will check your credit record to see if you are a good borrower who pays everything back on time. Every time a card firm checks your file it is flagged, so if you apply for lots of credit cards all the firms will see each other’s credit checks.

And naturally, a lot of credit checks causes alarm with lenders, which can make them more likely to reject your application. So don’t make lots of applications at the same time.

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Mini guide to credit cards

  • 0% purchase cards – a deal on cards whereby you pay no interest on purchases for a set period.

Great for: Big purchases.

  • 0% balance transfer cards – a deal where you pay no interest on balances transferred from other cards for a set period.

Great for: Clearing debts.

  • Cashback cards – these pay you back a small percentage of what you spend on the card.

Great for: Those who pay their balance in full each month.

  • Rewards cards – cards that reward you for using them with points to use towards a variety of things from supermarket shopping to flights.

Great for: Anyone who is brand loyal to one supermarket or airline.

  • Low-rate cards – these offer you a lower standard APR, usually under 10% APR.

Great for: Anyone with a large debt who doesn’t want to switch.

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