- Uswitch.com>
- Credit Cards>
- What is a credit card?
What is a credit card?
Similar to a loan, a credit card provides you with an amount of credit agreed by you and your bank, for you to spend. Read our guide to learn how a credit card differs from a loan, and how to responsibly use one.
A credit card is a plastic card that you can use to buy goods and services and pay later. It enables you to spend money on credit, and that you will pay back the amount you have spent.Â
Understanding credit cards and how they work is important to help you choose the right card and use it widely. Our credit card guide will explain how credit cards work, and the terms used, including credit card minimum payment and credit card interest rates.
Compare credit cards
Compare credit cards with Uswitch to see if there's a credit card that's right for you.
How does a credit card work?
When you spend on a credit card the money isn't debited from your account straight away, as it's with a debit card. The credit card amount does not come out of your current account, as it's a form of credit that you will have to repay at a point in the future.
You have an interest-free period, after which you need to pay a minimum amount back. This is known as the credit card minimum payment. If you pay off the entire credit card loan after the interest free period, you do not have to pay any interest on the sum you have spent.
Compare credit cards with Uswitch
Compare a range of credit cards from 0% cards to rewards cards. You can compare credit cards with Uswitch and compare some of the best credit cards for balance transfers, bad credit, purchases and much more.
What is the best way to use a credit card?
The best way to use a credit card is to pay it off in full when you receive your credit card bill each month. If you are unable to do that, you can reduce the cost of your credit by paying off as much as you can initially, and then look to reduce your overall debt as quickly as possible. That way you reduce the cost of the credit.
Many people use a credit card to pay for major purchases such as holidays, which they then pay off over a number of months. Credit cards can be a useful way of spreading the cost of expensive items. They are safer than carrying cash and some of them come with perks and rewards, which could be useful to you. When you take on a credit card you need to have a repayment plan so that you don't end up in more debt.
How to use a credit card?
Credit cards give you credit, which is usually interest free for up to a maximum of 56 days. After which you can either pay off what you have spent on your credit card in full – meaning you pay no interest – or you can pay off some of your credit card balance each month.
Typically, the minimum amount you must repay is around 3% of your credit card balance, plus interest.
There are many different credit card issuers, but most operate through two worldwide credit card networks – VISA and MasterCard.
How do I get a credit card?
You can look for the best credit card for your needs by using our comparison tables, and then click through to apply for the card that suits you best.
You may also be offered a credit card by your own bank, or if you're in a shop you may be offered the retailer’s loyalty card.
How do you pay off a credit card?
You can pay off a credit card by setting up a direct debt from your current bank account, by writing a cheque or making a bank transfer.
If you find you're relying on your credit card for everyday purchases such as food, or you are unable to pay off the minimum amount on your credit card bill each month, then that may be a sign that you are struggling with your finances and may need the help of a debt counselling service.
If you're thinking “I can't pay my credit cards what will happen?” and you're based in the UK, then you can find out more about the debt help that's available on our Debt Help Guides page here: https://www.uswitch.com/debt-help/.
Do I need a credit card?
If you want to make large purchases and pay them off over time, then you might find a credit card very useful. Credit cards can also be helpful when you are travelling abroad, or when you are buying items, goods or services worth over ÂŁ100, as your credit card offers you some protection if the goods are inadequate or do not arrive.Â
How long will it take to pay off my credit card?
How long you pay off your credit card debt depends on how much surplus income or savings you have to clear the debt. It is important to think about how you are going to repay your credit card debt and whether you can afford to have a credit card before you apply for one.
How long it takes to pay off a credit card also depends on your credit limit, which is the maximum amount you are allowed to borrow on the card, based on your application.
Some people are given bigger credit limits than others based on their credit score and credit rating, which is an assessment of their financial history, financial obligations and ability to handle credit.
How long does it take for a credit card to arrive?
When you apply for a credit card it can take around three weeks for your credit card to arrive in the post. Every application is different, but on average you will receive your card one to two weeks after making a successful credit card application.Â
Credit card calculator
Use the credit card calculator to help work out the costs of owning a credit card.