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Credit cards made clear

Whether you're new to credit cards or already have one or two, this section will explain how they work, what you should look out for and what to do if things go wrong. This is a brief summary, but if you'd like more information, the Association for Payment Clearing Systems (APACS) has produced a guide to help you understand how credit cards work. It explains the factors you should think about when choosing one and the best ways to use your card. For more information, see the APACS website.

APACS is the UK payments association and represents all the major UK credit card issuers.

What is a credit card?

A credit card is a form of borrowing. You can apply for one from a bank, building society and certain high street stores. If they accept your application, they (your card issuer) will set you a credit limit (the amount you can borrow).

How does it work?

You can use your credit card to buy goods and services and you'll get a statement each month showing how much you've spent. You have to pay back at least the minimum amount shown on the statement each month. The card issuer will charge you interest each month on any money you still owe (the outstanding balance).

A credit card gives you the freedom to buy things now and pay later - but usually at a cost.