Cards explained: how to use a credit card

A credit card allows you to borrow money for spending, up to a pre-set limit. The credit limit is set when you open your account, but you can apply to change it.

Credit cards usually have an interest-free period of up to 56 days from the moment of purchase, and a minimum payment due on a specific day of the month. If you can pay off your balance each month in full, you won’t have to pay any interest. If not, then interest will usually be charged at the stated APR (Annual Percentage Rate) unless the card has a 0% purchase or balance transfer promotional offer.

Always remember that using a credit card means you’re using borrowed money. The money isn't yours to start with, so it’s not like using a debit card. You’ll have to pay the credit card off at some point – and if you fall behind with your repayments, the overall amount you owe could keep increasing.

Firstly, it’s useful to know that you have more than one credit score. Lenders and credit reference agencies all have different ways of working out your score, and may take into account different information. Your credit score indicates how well you manage your finances, and it helps credit providers decide whether to approve you and what rates to offer you.

Managing a credit card responsibly – such as by making payments on time – can often improve your score, as it can show lenders you’re a sensible borrower. What’s more, some lenders may like to see that you’ve been approved for a credit card before, as it can indicate that other lenders trust you to repay them.

But remember, credit limits are there for a reason, and too many credit cards with high limits could make lenders think you’re overly reliant on borrowed money. So, try if you can to keep the credit balance you owe across all your credit accounts (not including mortgages) below 25% of the total limit – the lower the better.

You can get a good idea of how lenders may see you by checking your Experian Credit Score – it’s free and the UK’s most trusted credit rating*.

It depends. If the minimum payment covers all or most of your monthly balance, then it’s unlikely your score will be affected. However, if you’ve used a large proportion of your credit card limit, and you’re consistently making only the minimum repayment, lenders may believe you’re struggling to repay the debt.

Of course, it’s crucial that you make at least the minimum payment in full and on time – a missed or late payments could mean extra fees, a mark on your credit report that other lenders can see, a negative impact on your score, and even sometimes a default or CCJ (County Court Judgment).

It’s usually a lot safer to buy things online with your credit card, rather than a debit card. If things go wrong – e.g. you become a victim or fraud, or there’s a dispute over your purchase – you’ll have extra protection if you used a credit card. However, you should still be cautious when spending money online – here are our top tips for keeping your card safe:

• Use websites you know and trust, and beware of ‘phishing’ sites that imitate a genuine site
• Check that there’s a padlock symbol next to the address bar, and that the website address starts with ‘https’, not ‘http’.
• Hover over links before clicking, to check what you’re about to visit
• Don’t click links in emails that look suspicious – e.g. look out for spelling errors and generic greetings like ‘dear customer’

Withdrawing cash on your credit card can be expensive. Firstly, interest is charged daily from the moment you take it out, as opposed to the 56 days interest-free period for purchases, and secondly you may be charged a fee for the withdrawal.

And it’s not just taking cash from the ATM – buying foreign currency on your credit card may also count as getting cash.