• What are Credit Cards?

Credit cards have become a very useful and widely used tool for paying for goods and services on credit, then paying the bill at a later date. If used efficiently, credit cards can provide users with a method for spreading the cost of purchases over a longer period of time, and as long as the full outstanding balance is paid within the interest free period, you will never have to pay interest, so the only charge will be the annual fee.

• How can they benefit my credit history?

Another significant advantage to credit cards is that they help to give you a credit history, which can then be analysed by future credit providers to give them an idea of how trust-worthy you are. An example of this is when you apply for a home-loan.

For this reason it is important to think of a credit card as a temporary loan, or financial back-up, as opposed to a source of finance, as you could end up damaging your credit history, therefore making it more difficult to get approved for future credit.

• How can I avoid paying any interest/charges?

The key to using credit cards is always make at least the minimum payment at the end of the billing period. This will cause you to incur interest payments but will help you to avoid being penalised. Failure to make a payment on-time also results in a charge being applied to your balance.

• What types of credit cards are available?

There are several types of credit cards, designed to suit different sets of requirements. If you are a regular credit card user and always pay off your balance in full, it is worth considering a cash-back credit card, or a reward credit card. These cards give you something back for your spending, allowing you to get more for spending more. These cards are most effective when the user makes most day-to-day and large purchases on their credit card, then pay off the balance in full on time.

• What are the main credit card terms I should be aware of?

There are certain elements that most credit cards provide. Below is a description of the most common terms with an explanation of what they mean.

• 0% Purchases

Many credit cards offer a 0% purchases introductory periods. This is the amount of time you can use your card for making purchases without having to pay interest. It is important to remain aware of when the introductory period ends, and what the typical rate will be once this period ends.

• 0% Balance Transfers

Many Credit card providers also offer a 0% period for balance transfers. This can be used to move an existing balance held on another credit card and you will not pay any interest on this balance until the introductory period expires. This cam be very useful for people that want to pay off credit card debt without having to pay high fees.

• Annual Fee

This is a charge applied by the credit card providers on a yearly basis. The amount will be added to your balance, so make sure you pay it off when your bill is due to avoid paying interest. Some cards come with no annual fee, but before being attracted by this benefit make sure the card covers the features you require because some elements may have been sacrificed as a result.

• Interest Free Days

Most credit cards come with interest free days, usually ranging between 44 and 55 days. This is the period in which you have to pay off your balance to avoid paying any interest.

• APR

This is the Annual Percentage Rate that your balance will be subject to, rather than a flat monthly fee.