How do credit cards work?

You can use a credit card to buy things in the same way you use your bank account card.

However, when you spend on a credit card you are borrowing from the card provider, rather than spending your own money.

You will be sent a statement each month which shows your:

  • Outstanding balance, which is how much you owe

  • Minimum payment due, which is set by your provider

  • Interest rate

  • Due date of your next payment

You can choose to pay off your balance immediately or over time. If you choose to pay it off later, you could be charged interest on what you owe.

Where can you use a credit card?

Most places that accept bank account cards let you pay by credit card too.

You can use a card in person, online, over the phone, in other countries and for mail order purchases.

When you pay in person, you will usually use your PIN to authorise the transaction, but some vendors may ask for your signature or accept contactless payments.

How much can you spend on a credit card?

Credit cards come with a credit limit, which is the maximum balance you can reach without having to pay off some of it. Here is how credit limits work.

What types of credit card are there?

  • 0% on purchases: These cards won't charge any interest on what you spend for a set period - here is how they work.

  • 0% balance transfers: These let you transfer a balance from one card to another so you can cut out interest. Find out more about balance transfers here.

  • 0% money transfers: These cards let you move cash from your credit card to your bank account. Here's more on how money transfer cards work.

  • Cashback: These cards pay you a percentage of the amount you spend on your card. Here's how to use cashback credit cards.

  • Rewards: These cards give you points that you can exchange for rewards like air miles or supermarket loyalty points. Here is how rewards credit cards work.

  • Travel: These cards can come without fees for withdrawing cash or spending in another country. Find out how to use a credit card abroad here.

  • Credit building: These cards can help you improve your credit history if you make payments on time, but they usually come with a high interest rate.

How much does a credit card cost?

It does not cost anything to apply for a credit card, but it could cost you money in interest if you do not repay your balance in full each month.

You may also have to pay an annual fee or charges for withdrawing cash, using your card abroad, missing payments or spending beyond your credit limit.

Protect your spending

Your credit card purchases could be protected by:

Some credit card companies also offer protection against identity fraud or your purchase being stolen or lost. Each provider offers different cover and gives details when you apply.

How to get a credit card

  1. 1.

    Choose a card that suits your needs using our credit card comparison.

  2. 2.

    Apply for the card either online, by phone, by post or in person at a branch.

  3. 3.

    Activate the card so it is ready to use and set up your repayments. Here is how to set up and manage your new card.

Use our credit card eligibility checker, which will show you the cards most likely to accept you. This can help you avoid a rejection application which could harm your credit record.