Knowing what credit card rates, fees and charges will mean for you can help you make your choice.
When borrowing money on a credit card you will most likely have to pay interest on the amount that you borrow. The issuer of the credit card normally determines yourinterest rate based on information in your credit file. That interest rate will be applied to the amount you've borrowed.
Typically, interest rates are variable which means that they can be increased and decreased over a period of time. The reasons why interest rates may vary will depend on a number of factors, for example, how you manage your account, the cost of operating your account and also the current economic conditions.
Interest rates also differ depending on how you use your card. It’s common that there are different rates of interest for balance transfers, purchases, cash transactions as well as promotional offers.
APR stands for Annual Percentage Rate. It is made up of the interest rate for purchases plus any fee issuers charge for the card as a whole, like an annual fee, or for making purchases.
You can use it to compare different credit cards and loans.
This is the rate most customers will eventually be offered by a credit card issuer. The APR which credit card issuers advertise may not always be the one that that you’re offered. Most issuers will have a range of APRs, often advertising the best rate.
It’s a good idea to check with your credit card issuer what APRs they offer before applying as you could be offered these rates instead of a better rate which you’ve seen advertised.
Sometimes credit card providers offer promotional rates on balance transfers and purchases. These can include:
These promotional rates can save you money, but look for what suits you.
It’s always best to check if there are any fees in relation to promotional rates. For example, you may get charged a fee for transferring your balance from one card to another. You should take this into account when considering the right product for you.
This is what you’ll be charged when you use your credit card to buy things. Typically you’ll have up to 56 days (or around 20-30 days after your statement) to make your payment in full before you are charged interest. If you do not make your payment in full then interest is typically charged from the date the transaction is made until it’s paid in full.
Some cards offer introductory purchase rates which may be suitable if you are looking to spread the cost of large purchases over a short period. Usually, at the end of a promotional period the interest rate will go back to the standard rate.
Find out more about balance transfers.
This is when you use your card to make a cash transaction on your credit card. A cash transaction also includes any transactions that can be converted back into cash, such as:
Unlike purchases, interest on cash is normally charged daily from the date of the withdrawal, whether you pay off your balance in full or not. It is also common to be charged a fee for taking out cash on your credit card and the interest rate for cash transactions is usually higher than for purchases.
Some issuers also charge a monthly or an annual fee for having your card, regardless of how much you spend. Charges will be shown on your statement and should be detailed in your credit card agreement. Not all credit cards issuers charge these annual fees, and amounts can vary.
Setting up a Direct Debit will make sure that at least the minimum payment is taken each month, although it won’t prevent charges for going over your credit limit. Avoid over limit charges by monitoring your spending on internet banking.
Contact your credit card issuer straight away so that they can review your account. If the account has been charged incorrectly, your bank or credit card issuer will refund the amount taken.