Credit Cards: the basics

Understand how credit cards work

Thinking of getting your first credit card? Here are some things to consider.

Credit cards can help you manage your money by spreading the cost of your everyday spending and providing a secure way to pay.

Credit cards are typically used for short-term borrowing for everyday shopping such as groceries and petrol, or for larger purchases such as holidays or a television. A credit card can even be used to consolidate balances from other credit and store cards.

A credit card issuer will run checks on your credit file to see if you can afford to pay back what you borrow on your credit card. This is called a credit check. If you’ve previously had problems paying back your debts then your credit file may be affected. If you think this might be the case, you can contact a credit reference agency and ask to see your credit file.

A Credit Card is not suitable for long term borrowing and a loan may be more suitable.

What makes credit cards useful?

  • If you use them carefully, credit cards can help you spread the cost of your everyday spending
  • There are key differences between credit and debit cards
  • Credit card issuers will give you a credit limit, setting a ceiling on the amount you can borrow
  • You may get some legal protection under the Consumer Credit Act when you use your credit card

Using credit cards

Like debit cards, you can use credit cards to buy goods in shops,
over the phone and online. The process for making a payment will differ depending on how you do it:

  • In a shop: you’ll usually be asked to place your card in a chip reader and enter your PIN.
  • Online: you’ll need to enter your card details, confirm your address and in most cases verify yourself with a password.
  • Online or over the phone: you should expect to be asked for your CVV code. This is a 3 digit code on the signature strip on the back of the plastic.

Using your card abroad

You can use a credit card abroad to make purchases. Look out for the MasterCard®, American Express® or VISA logos depending on your card type.
Most card issuers will charge you a fee to change your purchases from foreign currency back to sterling.

You can also use your card to withdraw cash at a cash machine, bank branch or buy foreign currency (normally called a cash advance). Most credit card issuers will charge you a fee for this and the interest rate for cash transactions is usually higher than the rate for purchases and is typically charged immediately – if you’re not sure you should check your terms and conditions.

What are the differences between debit and credit cards

Bunch of kets - one is in lock.The key differences are:

  • When you use a debit card the money is debited from your bank account. With a credit card the money you’ve spent on purchases is normally held on interest-free credit until you receive your monthly statement. You can then either pay off the bill in full and not pay any interest, or decide to pay off some of your balance in which case you would be charged interest.
  • Typically you’ll be charged a fee for making a UK cash withdrawal at a cash machine using a credit card, but it’s generally fee-free if you use your debit card. If you withdraw cash using a credit card then interest is usually charged from the date of the transaction and the interest rate for cash withdrawals is usually higher than for purchases.

What protection do I receive when using my credit card?

Credit cards are covered by Section 75 of the Consumer Credit Act 1974.

Under the act, a credit card issuer and the retailer have joint responsibility for your purchase if there is a breach of contract or misrepresentation – for example, if the item is faulty or the company goes bust before you receive your goods. Plus, Section 75 can even give you protection for any costs that you incur as the result of the breach of contract by the retailer.

Certain conditions have to be met for Section 75 to apply, for example, the purchase needs to be over £100 and under £30,000.


Lloyds Bank credit card customers

See what extra benefits you might be eligible for.


Find out moreFind out more about our credit cards services

Looking for a credit card?

Explore our range of cards and see if we’ve got one to suit you.


Find out moreFind out more about our credit cards

Lloyds Bank ClickSafe®

We’re committed to helping make paying with your credit card safe.


Find out moreFind out more about Lloyds Bank ClickSafe®