Understanding credit cards
There are many different types of credit card and they are usually named after their purpose. Your financial situation and credit history will also be important when it comes to seeing what credit cards you are entitled to. There will also be limits as to how much you can spend, as well as different interest rates.
The key to understanding credit cards is to understand their charges. Not all credit cards will have the same charges, but in general, they can be summarised as follows:
- Ownership fees
- Interest rates
- Fees for not sticking to contract terms
A credit card: how it works
When people run into difficulties with credit cards, it’s often because they were unaware of the terms and conditions attached to that card.
In general, credit cards are similar to taking out a personal loan, as you are in essence loaning money that you have to pay back. This is the main difference between a debit and a credit card. Credit cards may offer more freedom to the user than a loan as they can be used for balance transfers and cash advances as well as for spending, but they still require responsibility.
Credit cards come with their own finance charges, penalties for missing payments and interest rates. Whilst it is possible to avoid any interest – and thus have a credit card for free – you need to keep up with your payments every month to achieve this.
Know the facts about credit cards and you’ll be far more likely to manage them correctly, use them for their benefits and not run into financial difficulty. Click on the links below to find in-depth guides to everything you need to know about credit cards.
- How to prevent credit card fraud
- Understanding credit scores
- Credit card purchase protection
- Credit card fees and charges
- Differences between credit card and debit card
Tailor your results with moneymatcher
The moneymatcher helps you compare all the key points like APRs, total cost of borrowing, cost of late and default fees and whether a product has an annual or monthly fee that adds to the overall cost of borrowing. Just type in a few details and reveal your financial match. It will even highlight the products you’re more likely to be accepted for, all without making a mark on your credit file.
If you do decide to go with an application (which will involve a credit search) don’t forget that only 51% of the people who apply for a credit card will typically get the representative APR rate, so you may be offered a higher APR or a lower limit by a lender.