A credit card is a way to borrow money. You use them just like you’d use your debit card to pay for purchases. But, when you’re spending with a credit card, you’re actually borrowing the money from a credit provider.
Typically, credit cards are meant for borrowing relatively small amounts of money, usually ranging from £1,000 to £5,000, although credit limits can go much higher for those on high incomes.
The amount of credit you are given will usually be based on your financial history and current financial position. If you’re looking to borrow more, it’s generally considered to be cheaper to get a personal loan as the interest rate is usually much lower.
With credit cards, you have more flexibility because instead of getting a lump sum of cash, you’re given a set amount of credit, and you can borrow as much as you need to within that amount.
You can then choose to pay off the balance straight away, or in monthly instalments. If you take the instalment route, you’ll have to pay interest on what you owe. The longer you take to pay back the amount you have spent, the more interest you will have to pay and it could end up being very expensive.
How to find the best credit cards, UK wide
When you’re looking for the best credit cards, it can be tempting to look for the cheapest deal. But it’s better to think about how you intend to use it, because each type comes with different benefits depending on how you use it.
Some credit cards are good for making a big purchase. Others can help you reduce your debt and interest payments. And some give you cash back or reward points on your spending. Here’s some more information about credit cards.
To help you find the best credit cards for your needs which have the lowest rates, look at the comparison table above. The table shows you the different types of cards, from different providers. It also shows you their interest rates, so you can compare cards to make an informed decision.
Try our free eligibility checker
Before you start to compare credit card deals, it’s important to find out which ones you’re actually likely to be accepted for.
Our free eligibility checker helps you find out which credit card offers you’re eligible for, and it won’t affect your credit score. It’s a risk-free way of finding the best credit card deal for you.
Here’s everything you need to know about our eligibility checker so you can find the best deals for you. Our eligibility checker uses a 'soft search' credit check, so it will not affect your credit score
What is the difference between a soft and hard credit check?
A ‘soft search’ credit check is carried out to determine how likely it is for you to be accepted for a new credit card. This type of credit check does not leave a mark on your credit report and doesn't affect your credit score.
A hard credit check is carried out by a bank or provider when you submit an application. This is noted on your credit report to reflect that you have applied for credit.
It's best to avoid applying for multiple cards at oncer, as too many marks on your credit report can mean that you are desperate for credit, which can imply that you are struggling financially. If you are not sure which card you will be approved for it is sensible to never apply for more than one at a time.
What types of credit cards are there?
There are lots of different types of cards to choose from in our comparison table. But which type is right for you?
A 0% Purchase credit card is one that gives you an interest-free period for a set amount of time when you first take it out. That means you won’t be charged interest on your spending for that period. The period can be from a month up to more than two years, depending on the provider and what offers you can find.
By getting a new credit card with a 0% purchase offer on it, you’ll be able to use it for a large purchase like a holiday or furniture. But don’t forget you’ll need to pay it off before the interest-free period ends, or you’ll be charged interest on the remaining balance.
Balance transfer credit cards
A 0% balance transfer credit card lets you move your debt from an older card, or even several cards, to a new one. It’s a useful way to avoid paying interest on your debt as the long interest free period offered on most balance transfers could save you plenty of money if you expect it will take you some time to repay the amount owing. But you should be aware that some providers often charge a fee to transfer your balance, so finding the best deals is vital.
Some balance transfer cards offer both balance transfers and purchases. This can be helpful for tracking how much you owe, so you can make sure you repay it in time. Just remember that the best credit card for you will give you a long enough interest free period for both balance transfers and purchases.
Money transfer credit cards
Money transfer cards are a way of moving cash from a credit card to your current or savings account. When you’re searching for the best credit cards, UK wide, see if you can find one with a 0% introductory period.
0% money transfer cards are ideal for clearing an overdraft. They’re also a good way to get a cash loan on which you don’t pay interest for a set period. Don’t forget to keep track of when the interest-free period on your new card ends. When it does you’ll start paying the lender’s standard variable rate and that tends to be high.
Cashback and rewards credit cards
When you’re looking for the top credit cards you could benefit from, you might like to think about a cashback credit card. These let you earn money back on your spending.
Or, you could look at reward credit cards. With these you earn points when you spend, and these can be used for things like air miles, shopping vouchers or hotel vouchers.
When you compare credit card offers, remember that these are one of the best cards for people who have a good credit history. They’re also good for people who pay off their balance monthly. That’s because you don’t pay interest, plus you can take advantage of the cashback offers or rewards points.
Credit-building credit cards
If you’ve got bad credit, or no credit history at all, you’re more likely to get accepted for a credit-building credit card than any other type of card. You’ll find that rates are often a bit higher with these, and you’ll usually get a lower credit limit. But, if you’re careful with how you use your credit-building credit card and make repayments on time, you’ll improve your credit score.
What are the benefits of using a credit card?
There are lots of reasons why you might want to get a credit card, aside from the obvious one which is that they let you spend more money than you have.
Improving your credit score
Having a credit card is one of the best ways to increase your credit score. It can help if you don’t have much credit history at all or if you want to improve a poor credit score. As long as you use your credit card responsibly (paying it off on time and not missing payments), your good behaviour will be recorded on your credit file. This’ll improve your credit score and help you when it’s time to get a car or mortgage.
Protecting yourself against fraud
Section 75 of the Consumer Credit Act protects you from fraudulent charges. If you do notice any unauthorised charges on your credit card, you’ll just need to report them to your lender and usually you won’t have to pay them. That’s not always the case with debit cards, or if someone gets hold of your bank account details.
If you use your credit card responsibly, you’ll be able to rack up air miles, cash back or loyalty points to spend with retailers or hotel groups. This could reduce your travel expenses in the long run.
Some of the best credit cards come with extra benefits, like travel insurance or airport lounge access. When you do a comparison, bear these in mind. Although they don’t sound like much, they can add up to a big saving over time. You may have to pay an annual fee for a card that comes with a range of benefits, so make sure the benefits outweigh the charges.
What are the disadvantages of using a credit card?
If you don’t borrow responsibly and miss repayments, you could end up with serious debt.
For many, having access to credit tempts them into spending more than they can afford leading to a cycle of debt, where they are continuously trying to pay off the debt they'e racked up.
What you should consider when you compare credit cards?
There’s lots to take into account when you compare cards. This includes:
Fees: These are the costs of having the credit card. They’re important to look at if you’re trying to find the cheapest deal. There might be an annual fee (which could cost hundreds of pounds), late payment fees, or over limit fees. So read the small print!
Interest rates: This dictates how much interest you pay for borrowing. Credit cards aren’t secured against any property. So, even with the best offers, interest rates are usually higher than with other forms of borrowing.
Interest-free period: Many of the best credit cards have an interest-free period at the beginning. During that time you’re not charged interest on your spending. As long as you pay the minimum balance on time every month, you won’t pay interest. The interest-free period can be from a month to around two years, depending on what deals you can find.
Rewards: Some of the top credit cards offer extra rewards. This could be cash back, air miles, or loyalty points. The more you spend on your card, the more you get.
The best credit cards have low interest rates, long interest-free periods and low fees. Though, that's not always the case. Many premium credit cards charge high annual fees and high APRs, but offer rewards and services that make it worth it.
This is why it’s important that you don’t just look for the lowest rate without thinking about anything else. Finding the best card for you means looking at why you’re borrowing money, how you plan to use it and what you can afford.
How to get the most out of your credit card
Credit cards are useful tool when used responsibly and strategically. Here are some things to keep in mind when using one.
Don't miss monthly payments: Missing payments is one of the worst offences when using a credit card. You're often charged a penalty, and it hurts your credit score.
Avoid withdrawing cash: Withdrawing money from your credit card often comes with hefty fees. You'll also be charged interest on top of that. It's best to avoid cash advances unless it's urgent.
Payoff your balance in full: Unless you've got interest free credit card, it's usually best to pay off your balance in full every month. It saves you from being charged interest, and you don't accumulate debt. It also goes a long way in improving your credit score.
Avoid too many applications: Applying for credit too often can hurt your credit score. That's because each time you apply, it leaves a mark on your credit file. It'll make lenders think you're desperate for credit and thus they'll be less likely accept you.
Be careful when overseas: Many credit cards charge foreign transaction fees when you use them abroad. Make sure you have a card that doesn't charge you these fees when you travel.
Be smart about rewards cards: Rewards cards can be tempting at first glance, but can prove expensive. Pick rewards that you actually use regularly and that they outweigh the annual fees that rewards cards usually charge.
Watch your credit utilisation ratio. This is the percentage of your total credit amount that you use up. Typically, it's recommended that you not use more more than 50% of your total available credit.
Keeping your balance within those limits tells your provider that you're using your credit card responsibly and are not struggling financially. This helps your credit score and in turn improves your chances to get better deals on credit in the future.
What happens if my credit card application is rejected?
Ideally, you should avoid having a credit application refused, but a rejection can hurt your credit history. One way to make sure it doesn't happen is to try to meet all the lending criteria before applying. Check your credit score through a credit referencing agency. You can also use an eligibility checker tool to find the credit cards that are mostly likely to accept you.
What happens if you miss a repayment?
If you miss a repayment on your credit card, you're mostly likely going to be charged a penalty and lose any introductory benefits, such as an interest free offer. It will also go on your credit report as a negative mark and hurt your credit score.
Can you increase your credit limit?
Once you establish a good record of making repayments on time, you can ask your provider to increase your credit limit. In many cases, some providers may offer to increase your limit as they see you as a responsible borrower.
Keep in mind though that if you request an increase to your credit limit, in most cases the provider will carry out a hard credit check before it is approved.
How many credit cards can I have?
There is no limit to how many credit cards you can have. It's really up to the credit card providers. Every time you apply for a credit card, the provider will do a credit check and will know how much credit you already have.
But having too many credit cards, or not having a credit card can negatively impact your credit record.
What having too many credit cards means can vary for different people, but instead of thinking about the number of credit cards, focus on working out what you need a credit card for.
Some people may have one credit card to earn cash back, one to earn air miles, and another for everyday purchases.