Understanding Credit cards
What is a Credit Card?
A credit card allows you to borrow money up to a set limit to make purchases, pay bills, or withdraw cash. You’re expected to repay the amount borrowed, either in full or over time with interest.
Key Features:
Credit Limit – The maximum amount you can borrow.
Interest Rate (APR) – The cost of borrowing if you don’t pay the full balance.
Minimum Payment – The smallest amount you must pay each month.
Introductory Offers – 0% interest for a limited time, cashback, rewards, etc.
Fees – Late payment fees, foreign transaction fees, balance transfer fees.
Smart Uses of Credit Cards
Build or rebuild your credit history.
Protect purchases with Section 75 (UK).
Spread the cost of large purchases interest-free during promo periods.
Earn rewards or cashback (if used responsibly).
Risks and Things to Avoid
Only paying the minimum — it takes years to clear the balance.
Cash withdrawals — interest starts immediately, often at higher rates.
Missing payments — damages your credit score and adds late fees.
Exceeding your credit limit — triggers charges and can lower your score.
How It Affects Your Credit Score
Credit cards influence:
Payment history (pay on time = good score)
Credit utilisation (keep below 30% of your limit)
Account age (longer history = better)
Credit mix and new applications
Debt-Free Credit Card Calculator
Use our credit card calculator to estimate how long it will take to pay off your credit card debt and how much interest you will pay compared to just paying the minimum payment.
balance transfers
What is a Balance Transfer
This simply means transferring the ‘balance’ of your credit card to another credit card.
Why do Balance Transfer
This can be a great strategy to pay off debt faster.
Moving existing debt to a card with 0% interest for a fixed time.
Note: this often comes with a fee (e.g. 2–3% of the amount transferred). so if done correctly it can save you a fortune in interest.
Things to Watch Out For
Transfer fees – Even 3% on a £5,000 transfer is £150, so factor that into savings.
Introductory period – After the 0% ends, the interest can be 20%+.
No new spending! – New purchases may not be covered by the 0% rate.
Credit limit – You might not be approved for the full amount you want to transfer.
Top Tip
If you can afford it, divide the total debt by the number of 0% months and pay that amount each month.
This ensures you’re debt-free before interest kicks in
Step-by-Step Guide
balance transfers
Check Your Credit Score
Lenders use it to decide whether to approve your application.
You can check for free using sites like Experian or Clear Score
Compare Balance Transfer Offers
Look for 0% interest deals with the longest duration possible.
Compare balance transfer fees (usually 1–3% of the amount transferred).
UK comparison sites: MoneySuperMarket, Compare the Market and GoCompare.
Apply for the New Card
Only apply for one at a time to avoid multiple credit checks.
Provide details of the card(s) you want to transfer from.
Request the Transfer
Many providers let you request it during the application process.
Alternatively, log in to your new card account and request it after approval.
Pay Off the Old Card (Indirectly)
The new card company sends money to your old card provider to clear the balance.
Stick to the Plan
Always pay at least the minimum on time
Missing a payment can end the 0% deal.
Aim to clear the balance before the 0% period ends to avoid high interest.
How Credit Card Billing Works
Your card runs in cycles, usually about a month long.
At the end of each cycle, your provider sends you a statement showing what you owe.
You then have a few weeks (called the grace period) to pay it off.
If you pay the full statement balance by the due date, you pay no interest.
If you pay less than the full amount, interest is added often starting from the day you bought each item.
Find out how your billing structure works to avoid accidently paying interest even if you clear your balance each month.
Disclaimer
This page is intended for educational purposes and should not be taken as financial advice.
We do not recommend or endorse any specific credit card products.
Please review terms and conditions carefully and consult a regulated financial adviser regarding your personal financial situation.
