What is a credit card
A credit card is a revolving credit facility with a credit limit. Each month you receive a statement and must pay at least the minimum payment by the due date; you can pay off the full balance at any time.
Interest-free days and APR
If you pay the full statement balance by the due date, purchases are usually interest-free for up to about 56 days. If you pay less, interest is typically charged on purchases from the date of each transaction. Cash withdrawals usually attract interest from the day you take them.
The representative APR in adverts only has to be offered to at least 51% of successful applicants — you may be offered a higher rate.
Fees to watch
- Cash withdrawals — often around 3% (with a minimum) plus interest from day one. Gambling transactions and buying foreign currency are often treated as cash.
- Balance transfer fees — typically 0–3.5% of the amount moved.
- Late and over-limit fees — generally capped at £12 per occurrence in line with long-standing regulator guidance.
- Non-sterling transaction fees — often around 3% abroad; many travel cards charge none.
Section 75 protection
Under Section 75 of the Consumer Credit Act, the card provider is jointly liable with the retailer if something goes wrong with a purchase costing between £100 and £30,000 — even if you only paid part of it on the card. This makes credit cards one of the safest ways to pay for larger purchases.
Minimum payments and persistent debt
The minimum payment must cover at least interest, fees and 1% of the balance. FCA persistent debt rules require your provider to contact you if you have paid more in interest and charges than capital over 18 months, and to offer a way to repay faster after 36 months.
Example: a £3,000 balance at 25% APR with a minimum of 1% of the balance plus interest (at least £25) takes over 15 years to clear and costs around £5,100 in interest. Paying £150 a month clears it in just over two years with about £920 of interest.
Enter your balance and APR into SMARTPRO to see how long repayment takes at different monthly amounts and how much interest you will pay.
How terms differ between providers
| Term | How it can differ |
|---|---|
| 0% periods | 0% on purchases and/or balance transfers, sometimes for well over two years. |
| APR after the offer | Standard purchase APR; separate cash and balance transfer rates. |
| Rewards | Cashback, points or air miles; annual fees on premium cards. |
| Overseas use | Non-sterling fees and cash withdrawal fees abroad. |
| Eligibility | Soft-search eligibility checkers; credit-builder cards with low limits. |
How to use a card wisely
- Set up a direct debit for at least the minimum — ideally the full balance.
- Don’t withdraw cash on a credit card.
- Note when 0% offers end and clear or move the balance before then.
- Use eligibility checkers to avoid unnecessary hard searches on your credit file.
This material is for general information only, describes UK rules in force on the publication date, and is not financial, legal or tax advice. Rules, schemes and lenders’ terms change — always check your agreement, your lender’s current terms and official sources such as the FCA, MoneyHelper and GOV.UK.