There's so much to consider when taking out a credit card, from what you can afford and what type of card is best for your needs to how to go about applying. However, the sheer amount of technical terminology you might have come across when researching credit cards may be holding you up or even putting you off.
Luckily, we're here to help. Read our simple credit card jargon-buster and the subject should hopefully become a lot clearer.
Some lenders allow you to name one or more additional cardholder to share your credit card account.
They will each be issued with their own card, but there will still be one statement and one bill a month. Be aware that the person who took out the credit card agreement is liable for paying back what's borrowed, regardless of how much cash another of the cardholders may have splashed.
As with a debit or cash card, your credit card can be used to withdraw money from an ATM – but it's not advisable.
This is because there is usually a charge involved for withdrawing money with your credit card, and the action will also show up on your credit report.
This can act as a warning sign to possible future lenders, who may be worried you have affordability issues as you're having to borrow the money you're withdrawing.
Most providers charge interest on cash withdrawals too – from the date of the withdrawal.
Some credit cards let customers earn cashback as they spend. This cash is a percentage of the money spent on the credit card, and can be used in any way you want.
This is an alternative to a credit card, in that there is no interest rate or spending limit, but you have to pay the balance off in full every month – you can't choose to make a minimum payment.
This may not be the best option if you like spreading out your repayments to make affording and managing them more straightforward.
Different credit cards have different charges attached to them, such as annual fees, and it's important you familiarise yourself with these before you start to use your card.
Most lenders will charge you for a late or missing payment, so be sure to pay your credit card bill on time.
Mobile App
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Pay for up to £30 worth of items quickly and securely
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39.9% APR
Representative
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This is the security system that allows you to shop safely with your credit card.
Never share your PIN number with anyone, as if your card is later stolen or goes missing you may forfeit any protection you would have had from your lender if they discover that someone else had access to the digits.
Some credit cards allow you to make 'contactless payments'.
These are limited to transactions of up to £20 – you just touch your card to the card reader in store and there's no need to enter your PIN number (although for security reasons you make be asked to do so every so often).
This is the agreement you make with your lender that they will provide a certain service and you will repay the money you borrow. You should receive a copy of this when you are accepted for the credit card you have applied for.
If your credit rating and history are not what you hoped for – either because you have had difficulties repaying your borrowing in the past or you have never borrowed – it can be much harder to take out credit.
However, it's not impossible, and a credit builder card may be what you're looking for. These typically come with a lower spending limit and a higher interest rate than most other cards, but they are designed for people with poor credit scores and non-existent credit histories to build up their credit rating.
Used responsibly, by paying your minimum payment on time and staying within your credit limit, this type of card could help make you appear a more attractive customer to lenders in the future. However, not doing so could harm your credit rating.
This is a detailed record of your borrowing for the last six years and is one of the things lenders use to determine whether or not to accept your credit card information.
Things like missed or late payments can show up on your credit history for up to six years and may make borrowing difficult during this time. Similarly, if you have no credit history to speak of you may also find it hard to borrow, as lenders don't have the reassurance they're after that you have used credit responsibly in the past.
– The credit limit is the total amount you are able to borrow on your credit card at any one time.
Once you have reached this limit, you will need to pay off some or all of the balance to be able to borrow on the card again. If you exceed this limit, there may be a charge and it could also affect your credit score, so take care not to do this.
This is a single score applied to your credit report once factors like your credit history and other details such as whether you are registered on the electoral roll have been taken into account.
It isn't a permanent score and changes along with your borrowing history, and it's one of the things used by lenders to help them decide whether to lend to you.
You can access your credit rating and report through one of the credit reference agencies, or a third party like Ocean.
These are the companies that provide lenders with detailed credit data.
The three main ones are Experian, Equifax and Callcredit. As well, as providing lenders with information on your credit report, they must also provide it to you if you request it.
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