Credit Cards Guide - cashfloat

A Guide to Credit Cards in the UK

Over 60 million credit cards are now in use in the UK, yet half of us still don’t completely understand how credit cards work. On top of this, while many people are aware that even the best direct lender payday loans are quite expensive, they often don’t think twice before getting into a huge amount of credit card debt. In this guide, you’ll get information and advice about credit cards that will help to save you money.

What’s in this guide?

The guide begins with an introduction to the history of credit cards. You will discover how the first American credit cards worked, how they moved from the USA to the UK and how technology has allowed these cards to evolve into being able to make contactless and international transactions.

After that we will explain everything that you need to know about how credit cards work. We will explain how a credit card contract works, how people can benefit from having one, what risk they pose, how to choose one that suits your needs, how to avoid debt and fraud and the importance of your credit rating. We will also explain how some alternatives to credit cards work, such as charge cards, prepaid cards and debit card overdrafts. After that, we will explain how business credit cards work and what the dangers are of borrowing with subprime credit cards. All of our information and advice takes into account the risk of borrowing money with a credit card and you will find responsible advice in this guide.

This fascinating guide has something for everyone! Here is a table of contents of all of the chapters we’ve prepared for you. Pick one and enjoy!

The Credit Card Guide Table of Contents

What is a Credit Card?

We all know that credit cards are made of plastic and conform to a standard size. What a credit card provides is basically a type of loan that credit card holders can use to pay for items in shops, to pay bills or even to withdraw cash. 

Credit cards allow users to spend up to a certain amount on credit. If the user then repays the full amount by a certain date (usually by the end of the month), they will not be charged anything for the money that they have spent. However, if the user does not repay the full amount by the agreed date, they will be charged interest on any money that they still owe. Interest rates and payment deadlines vary depending upon the agreement made by the company issuing the card and, usually, whether or not the user has used the card to buy goods or to withdraw cash. Many credit card companies will immediately begin charging interest for cash withdrawals made using a credit card. Credit card companies make money from the interest rates they charge to their customers and, also, from additional fees.

Usually, there is a minimum amount that has to be paid off each month. This could be a percentage, such as 1 or 3% or you could have to pay a flat rate minimum, such as £5.00. 

Did you know?

As well as allowing customers to borrow money, when they don’t immediately have it, credit cards also offer other features! They are easier and safer to carry than cash. Normally if you have your credit card stolen, the thief will not be able to use it and you will not lose any money. Before credit cards became available, many payments were made in cash and this made people vulnerable to theft. On top of this, nowadays, credit cards offer extra protection on payments and many offer additional freebies. Most purchases made, between £100 and £30,000, are protected by the credit card issuer. This means that if you make a purchase and there is a problem with it, then you can reclaim the money from your credit card company. This is particularly useful for purchases made from companies who subsequently go bankrupt. As freebies, many credit card companies offer free air miles, reward points or cash back to people who use their cards.

How to Use this Guide

Financial knowledge is not something that everyone learns at school. However, once you enter adult life, it is critical to know exactly how all different types of credit work, from credit cards to cash advances, and how to make them beneficial to you.

Use the guide to understand everything you need to know about the world of credit cards and then make them work for you.

Remember that, while many people use credit cards responsibly and they can be very beneficial, if they are used irresponsibly, credit cards can cause debt. If you’re struggling with credit card debt, you can contact StepChange, the UK’s leading debt charity, for help.