A credit card allows you to make purchases on credit or transfer an existing balance.
You can spend up to a pre-set credit limit set by the provider, then either pay off your bill in full each month or make monthly instalments.
You’ll need to pay at least a minimum monthly amount, which will be set by the provider depending on your balance
Every credit card has an interest rate attached to it which is the percentage you'll be charged on top of the amount you owe. The interest rate your provider charges you will largely depend on your credit rating, as well as the provider’s own criteria.
Some cards have introductory rates, which means a lower interest rate when you first take it out. You may have 0% interest on purchases or balance transfers to start. But watch out for other fees, and always be certain of when it will end as you’ll start being charged interest.
If used sensibly, they can help you spread the cost of big purchases, earn cashback and loyalty points, give you consumer protection, and they could even help cut the cost of any existing debt you may have. But whether or not you need one, depends on your own circumstances and any financial commitments you already have.
A credit card can be a great addition to your finances, but it’s important you find the right one for your needs
Check which credit cards you’re more likely to be accepted for
Your name, date of birth and email address
Whether you’re a homeowner and how long you’ve lived at your address
Your employment status and annual income
You should always compare your options. Use our smart search to see which credit cards you’re eligible for first - without affecting your credit rating.
If you already have debt, you may feel like a credit card isn’t an option. There are, however, credit cards for those with bad credit scores.
If you’re accepted for one of these cards, you can spend on them and repay in full each month to help improve your credit record.
These cards will usually have a high interest rate attached to them, so it may be worth looking into different ways to pay off your existing debt and boosting your credit rating first.
With interest free credit cards, you won't be charged interest on purchases, balance transfers or in some cases both. This will be for a set amount of time, after which you’ll start being charged interest.
These cards let you to move an existing credit card debt over to a balance transfer card which has either a 0% interest introductory period or a low interest rate.
Be aware of any transfer fees and the interest rate you’ll be charged when the interest-free period ends.
Find the right credit card for your needs, use our soft search to compare offers and avoid impacting your credit rating.
Purchase cards can offer a long, interest-free period before you have to pay, meaning you can spread the cost of a major purchase.
Be sure to at least pay your monthly minimum payments to avoid fees that can stack up and make sure you repay the balance in full before the interest-free period ends to avoid paying any interest.
A reward credit card does exactly what the name suggests - it will reward you for your spending, and generally you'll earn points to redeem via a rewards scheme, for example, Tesco Clubcard, Nectar or Air Miles/Avios.
Cashback cards allow the holder to earn back a percentage of what they spend as an annual bonus, with some lenders paying as much as 5%.
Just be sure you can clear your balance in full each month, or the interest you pay will soon outstrip the money you earn.
A business credit card, also known as a company credit card, is used by you and your employees to make purchases for the company.
They may offer rewards, cashback and travel insurance, but beware of annual fees.
If you can handle your finances responsibly, student credit cards will work in the same way as standard credit cards, with the chance to spread the cost of purchases.
Make sure you at least make your minimum monthly payments to avoid charges.
Prepaid cards let you load a chosen amount of money onto a card, which can then be used at cash machines and to make purchases.
Unlike with a credit card there's no credit arrangement involved, which means there won't be any interest to pay and there's no need for a credit check.
Whether or not your application for a credit card is successful depends on your credit score and financial situation. If you have a low credit score, expect to pay a higher interest rate if you're accepted by a lender. Generally, the better deals are reserved for people with high credit scores.
Every time you apply for credit it gets marked on your credit file. This can have a negative impact on your credit score, particularly if you're refused credit. That's why using a soft search is a good idea. It'll give you an idea of which credit cards you're more likely to be accepted for, before you make an application.
There are a few ways you can keep on top of any debts you have, and make sure your credit card is working harder for you
If paid off promptly, cards can give you an interest free, short-term, flexible loan
Do you pay it off straight away or keep longer-term debt? Figuring this out will help you decide which is the best card for you
A smart search will show you cards you’re likely to be accepted for before you apply, and won’t affect your credit rating
The interest on debt is almost always more than the interest you'll earn on savings. Keep your debt manageable, and pay it off as often and as quickly as you can
Transfer existing debt over to a new card that charges either a very low interest rate, or gives you an interest-free period
If you intend to stop using an old card, then make sure you cancel it and cut it up as soon as your debt is moved across or paid off
Look at which debts are costing the most interest and prioritise paying these off first
Your credit rating is a way of showing how risky it would be to lend to you. The better your rating, the more likely you are to be accepted for a credit card.
If you have a bad credit rating, you may be rejected if you apply for a credit card and this can leave its mark on your credit rating.
Use our smart search instead to see which options are available to you, without leaving a trace on your credit score.
Keep in mind that your credit ratings can also be affected by how close to your credit limit you are - it's recommended to keep your balance at around 30% of your limit.
If you don't pay off your debt in full each month you're likely to be hit by interest rates - these can be very high and there's a danger that debt can get out of control.
Also, using credit cards for cash withdrawals can be expensive - you'll be charged interest as soon as you get the money and will have to pay a fee for every withdrawal.
If you're struggling with repayments, speak to your lender as a first port of call. The lender won't want you to default on the debt and may find a way to help.
You can also contact your local Citizens Advice Bureau, National Debtline, Money Advice Service or StepChange Debt Charity (formerly the Consumer Credit Counselling Service) for advice.
APR stands for annual percentage rate and takes into account the interest rate and other charges to calculate the cost of lending for products such as credit cards, loans and mortgages.
Because it includes charges, APR can be a bit confusing - the interest rate of a product might be 14% per annum, but the APR might be 17% because fees add the equivalent of another 3% per annum.
Don't assume that a card with a lower APR is better, as different card providers calculate interest in different ways and may apply other charges for lending, such as a balance transfer fee or early payment fee.
It completely depends on what you require from your credit card, whether you're using it to help clear debt or for your weekly purchases.
But whatever you're using your credit card for, make sure you shop around for the best fit for your needs.
There’s no such thing as a joint credit card in the UK, but it's sometimes possible to add additional cardholders to your account. However, the additional cardholder has no liability to pay for any debt on the card.
No, your interest rate is typically linked to your credit rating and the lender's own criteria, so those with excellent credit ratings may be offered a better rate. If you have a poor credit rating you may struggle to get a credit card at all.
Having an established relationship with your bank may help you gain access to a good deal on a credit card, but never assume that loyalty pays - shop around for credit cards with our smart search.