A credit card is, effectively, just a little bit of plastic that allows you to buy things now and pay for them later, whether you want to do it in a shop, or online or over the telephone. It differs from the debit card in that it's the bank's money, to start with. It's a form of borrowing, which you need to remember, and you'll need to pay it back.
You can pay it back straight away, and normally you can get a period of interest-free credit; or otherwise, if you pay it back over a longer time, you just need to be careful, because the longer you pay it over, the more money you're going to have to pay back because the bank will charge you interest.
Well, you have to be over 18, and normally have to be a UK-resident as well, and have a bank account in the UK.
One of the strongest benefits for everyone of using a credit card is the extra protection it can give you for purchases.
Section 75 can provide additional protection for card purchases where there has been a breach of contract or a misrepresentation by the supplier… You may be able to claim a refund from the Credit Card Company.
For anything between £100 and £30,000, there is protection in three cases. There's protection if the company goes bust; there's protection if something doesn't arrive – like, you've bought it on the internet – and there's also protection if something is misrepresented.
There's three main advantages of having a credit card. The first one is the convenience of being able to buy something when you want to. The second one is the purchase protection, which will cover you for anything you buy, for larger purchases, anywhere in the world, not just in the UK. And the third one is it can help you build up your credit rating, too.
The way the interest is calculated on a credit card can vary, depending what kind of purchase you're doing. If you're buying something, you would normally get around 56 days interest-free credit. If you're doing something like a cash withdrawal, however, you'd normally be charged interest straight away. It varies, also, depending which bank, which building society you go to.
You get a monthly statement, and the best way to pay off your credit card is to set up a direct debit.
That way you're not going to forget about it and you're not going to miss a payment and incur any fees or charges. There's three options that you have. The first one is to make the minimum payment, but it's best not just to do that, because it will take longer to pay off your credit card. The second one that will suit some people, not all, is to actually set it up to clear the credit card balance, whatever it is, every month automatically from your current account. And the third option is that you can actually decide how much you want to go out by direct debit every month.
When you're looking for a credit card, I think it's important not just to look at the features, but also the benefits that you might get. You need to consider how you're going to use the card. For instance, you might be considering transferring your balance from elsewhere, which could save you money, or otherwise you might be planning to clear the balance of the credit card amount monthly, and you might be doing a lot of travelling abroad, or you want to get some kind of reward for spending.
To stay on top of your credit card I'd say there's five points.
The first one is only borrow what you can repay.
Decide the amount you want to pay each month, ideally more than the minimum payment.
Know what your credit limit is, and stick to it.
Keep receipts for all your credit card transactions. This will mean that you can check that your statement's correct.
And finally, be aware that different transactions have got different interest rates and charges attached.
I think the best thing about a credit card is as long as you manage it properly, it can give you brilliant protection, and it's fantastic for convenience, too.