Credit Cards

An Introduction To Credit Cards

A man is shown accepting a credit card payment at a shop

There’s no doubt that credit cards are a convenient means of payment when you have unexpected bills but are short of cash, or as a way to shop online. A major advantage of credit cards is that apart from the security measures put in place by the card issuer, you’re also protected by Section 75 of the Consumer Credit Act for any purchases costing £100-£30,000. In this article we look at:

  • How credit cards work
  • How you can apply for a credit card
  • Getting a credit card with bad credit
  • Withdrawing cash with credit cards

How do credit cards work?

When you spend money on a credit card, you’re in fact using a loan facility, with a spending limit set by the card provider. You have an interest-free period (usually 20-55 days) when you aren’t charged for your borrowing. You must make the minimum payment on time, or you’ll be charged penalty fees for late or missed payments.

Credit card transactions are protected for any purchases costing £100-£30,000

After your payment date, you’re charged for any outstanding balance according to the APR offered by your card provider. You are sent a statement every month so you can keep track of your spending and repayments.

How can I apply for a credit card?

You can apply for a credit card in-branch, online, by post or by phone. Before you do so, you should research the market to see what type of credit card you need: 0% purchase cards, 0% balance transfer cards, etc. All have their pros and cons so you should read their terms and conditions carefully, especially any limitations on introductory offers and the availability of extra benefits like cashback and rewards.

A couple are looking at a credit card comparison site to determine whether they fit a credit card issuer's criteria

Using an online comparison site is a useful start because many allow you to check whether you fit the card issuer’s eligibility criteria. In this way, you have a greater chance of being accepted. Once you have chosen the right credit card for your circumstances, you fill in an application form with personal details and information about your income and financial history. Before you’re accepted, the credit card provider will carry out a credit check.

Can I get a credit card with bad credit?

There are special credit builder cards for people with a low credit rating because of little/no credit history, or because of a history of poor money management. Credit card issuers use risk-based pricing. This means the higher the risk you represent as a borrower (according to your financial history and/or credit score), the higher your interest rate.

There are special credit builder cards for people with a low credit rating because of little or no credit history.

Credit builder cards often have higher charges and lower spending limits. However, they’re an ideal way to build up your credit score if used wisely, and as long as you spend small amounts and repay the outstanding balance in full every month.

Can you withdraw cash with credit cards?

It is possible to withdraw cash from an ATM by credit card. However, it should be avoided. Not only do these cash advances cost you more in extra fees, but you’re charged interest from the date the money is withdrawn. Cash advances will also be noted on your credit file and give the impression that you have poor money management skills which can affect your future access to other credit facilities.

About the author

Megan Walsh

Megan, a former employee of over 20 years in the insurance industry, is devoted to sharing her valuable insights on

Apart from her interest in insurance, Megan also enjoys painting, gardening and keeping up with current affairs.

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