What is a Credit Card?

Credit Cards are a convenient way to purchase goods and services without the need to carry cash around with you.  Not only can this make them a safer option to cash, they also provide you with protection should a supplier go out of business or sell you faulty goods.

Quite simply a credit card is a plastic card issued to you by one of the many credit card providers in the market. 

In return for you using their credit card to purchase goods and services, after an initial period, usually around 56 days, the provider will charge you interest for borrowing the money until you repay the amount.  This does vary so check credit card provider terms and conditions for details before making your selection.

This does mean that if you are disciplined and pay the money back each month within the initial period, you won’t be charged any interest.

How Much does a Credit Card Cost?

This will depend on how you use your card! Most credit cards are free to apply for and you will only be charged interest on the balance outstanding each month.  So there is a good incentive to repay all or as much as you can afford before the due date.

Take care with payment dates because if you make a late payment or fail to make a payment, you will be charged additional fees and sometimes additional interest.  One way of avoiding late payment is to set up a direct debit that clears the outstanding balance on a monthly basis.  This way you should never have to incur unnecessary fees.

Credit Cards should not be confused with loans.  With a typical APR of around 18%, it would be an expensive way to borrow money in the long term but for short term usage, it could be an acceptable price to pay.

Why have a Credit Card? 

They are convenient and whether you are a regular or infrequent user, they can be a simple way to buy something without the need to carry cash around with you.

If you use them wisely and always pay back what you borrow every month, you won’t pay any interest.  They therefore become an interest free way of borrowing money in the short term.

As you will see in our Consumer Protection section, they also provide you with additional protection on your purchases.

Whats more, we all have a credit rating which influences how finance companies assess whether to lend to us.  Using a credit card effectively is a great way to build up your credit rating.

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