Questions & Answers

1. What is a credit card?
2. What is APR?
3. What are the differences between a Credit card and a Debit card?
4. Which credit card should I choose? Should I have cashback, low standard APR or accept an introductory 0% 6 month offer?
5. Can I use my credit card abroad?
6. Where can I go to compare the various credit card deals available?
7. Are credit cards safe to use on the Internet?
8. Will being refused for a credit card affect my overall credit rating?
9. How can I protect myself against credit card fraud?
10. Can I use cash machines to withdraw money direct from my credit card?
11. Can I add an additional cardholder to a credit card, and if so, with whom does the responsibility of the card account rest?
12. What factors influence the credit limit on my card, and how can I increase an existing card limit?

A credit card allows you to borrow money from the card issuing bank (or other lender), in order to buy goods and services or withdraw money from an ATM. If you pay the money back by the end of the month, the bank does not charge you any interest. If you still owe the bank some money after the month is over (and any additional interest-free days have passed), you will pay interest on the remaining balance at a rate agreed between yourself and the bank.

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APR is an abbreviation of "Annual Percentage Rate" . If you were to allow interest to accumulate on your credit card balance for a full year, this would be the interest (as a percentage) that you would pay. Interest, however, is charged to your account monthly (and usually is calculated daily). This leads to compound interest, where you are charged interest on the current interest.

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3. What are the differences between a Credit card and a Debit card?

A credit card uses money that you borrow from the bank - even if you clear your monthly balance, you will still have borrowed off the bank in the short term, up until the time that balance is cleared. A debit card is usually linked to your current account and only allows you to spend money that you actually have.

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4. Which credit card should I choose? Should I have cashback, low standard APR or accept an introductory 0% 6 month offer?

The type of credit card features that you choose depends upon your personal needs. There are various types of credit cards and features available to you, such as cashback credit cards, low APR cards, and balance transfer offers.

There are also cards available that cater for specific interests, for example, you could get a card that supports your local football team or favourite charity (such as the RSPCA credit card), however, these types of card are not always the most competitive on the market.

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5. Can I use my credit card abroad?

Yes, credit cards can be used abroad. Most cards will charge an international handling fee, as well as charges in line with the current exchange rate of the country that you wish to purchase from. This is also the case when items are purchased from internet sites that are not based in the UK.

If you travel a lot, it is worth taking out a credit card that lowers the cost of foreign usage. There are many cards that you can get that will offer you deals abroad. Some may offer airmiles on every transaction; others may offer you low foreign handling fees or low cash advance charges, such as the commendable Nationwide credit card offerings.

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6. Where can I go to compare the various credit card deals available?

We have a comprehensive credit card review section that includes a credit card comparison table, and informed opinions on the latest cards for you to look at when finding the best card to suit your needs.

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7. Are credit cards safe to use on the Internet?

Generally credit card companies will offer a 100% internet fraud guarantee with their cards, although there may be a £50 excess charge. Egg, for example, is an online bank that actively promotes its internet fraud protection. Cahoot, the online bank, innovatively offer the "Cahoot Webcard", which greatly improves your security when shopping online.

As a general rule, you should base your decision when choosing a credit card on key features, such as standard APR, rewards schemes and customer service. It is likely that the card you choose will come with internet fraud protection. For more help with this issue, take a look at our consumer protection information.

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8. Will being refused for a credit card affect my overall credit rating?

Whenever you apply for a credit card, a credit check is performed by the company that you are applying with. This leaves a "footprint" - a note on your credit history alerting others to the application you have made. If a credit card company sees multiple credit checks (these footprints) over the course of a few months, they will look less favourably upon your request for a card.

The credit scoring companies only hold records of credit checks carried out in the past 6-12 months, so if you have changed your card a few times to take advantage of introductory balance transfer rates, this will not count against your credit score. It is only when an unusual amount of applications have been processed that footprints will impact your credit score.

In addition to this, the card issuer will be able to check whether you have had debt problems, such as Arrears or County Court Judgements (CCJs), and they may also look less favourably upon your request for a credit card if you have changed address an unusual number of times.

Our main site has a comprehensive Credit Scoring section, with further in-depth explanations of credit scoring, and information on obtaining your credit score.

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9. How can I protect myself against credit card fraud?

Unfortunately credit card fraud is on the rise. Criminals that perform such actions are becoming increasingly effective in what they do.

Make sure that any unauthorised transactions carried out on your card do not go unnoticed; go through your credit card statement carefully each month. If you do not notice any fraudulent transactions, nothing can be done about it. Keep your card on you at all times and never reveal your pin number to anyone, including employees of the card issuer.

The big credit card networks, Visa and MasterCard have introduced new technology, such as "chip and pin", in an effort to reduce fraud.

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10. Can I use cash machines to withdraw money direct from my credit card?

Your card issuer should ask you, when you take out your credit card policy, whether you wish to receive a pin number. If you want a pin, you may use this to withdraw from cash machines.

Credit card issuers will charge for a cash advance, usually between £1-2 depending on the amount withdrawn, so it is inadvisable to use a credit card primarily to withdraw cash. Nationwide Building Society's credit cards, however, should be commended for charging just 50p (or 0.5%, whichever is greater) on cash advances.

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11. Can I add an additional cardholder to a credit card, and if so, with whom does the responsibility of the card account rest?

Many card issuers will give you the option of adding an additional cardholder to your account. However, the responsibility of the credit card, including all payments, fees and late payment penalties are still yours.

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12. What factors influence the credit limit on my card, and how can I increase an existing card limit?

There are quite a few factors that will influence your credit limit. The biggest factors are usually your income and credit history.

Banks will often automatically increase their customer's credit limit if that customer has provided regular payments over time. Surprisingly, they are less likely to increase the credit limit for those that clear their monthly balance, than for those carrying debt. The lenders make their money on the monthly interest charge, so they have no problem with those heavily indebted, as long as they are making regular, monthly payments.

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