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What are credit cards?
Credit cards offer a flexible way of spreading payments and paying debt. Your bank, building society or other credit provider will lend you the money to buy items online and in store. That means the amount you spend using your card is a debt. You can spread the cost of expensive items, earn rewards on your spending and even use credit cards to reduce your debts.
You’ll pay back the money you owe each month, either the full amount or in instalments with interest on top. Used well, credit cards can be beneficial, but there are pitfalls to watch out for.
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Which is the best credit card for you?
There are several types of credit card to suit different situations. Used wisely, a credit card can be great for life’s little emergencies, big purchases and to reduce monthly outgoings by consolidating debt. The best credit card for you depends on your circumstances and what you want to use it for. Here are some of the options.
0% on balance transfers - Lets you move debt from existing card to one with lower interest.
0% on new purchases - Charges no interest on new card spending for a fixed period.
0% on balance transfer and purchases - Combines benefits for transfers and spending.
Reward cards - Gives you cashback, points, air miles or other rewards as you spend on your card.
Credit building cards - Helps build credit scores with careful spending and repaying.
Travel credit cards - Comes with low or 0% fees for foreign usage charges and possibly favourable exchange rates.
Money transfer credit cards - Can help to consolidate other debts via your bank account with lower interest rates.
Cashback credit cards - Gives a percentage of the amount you spend on the card back as an incentive to use it.
Whichever type of card you choose, make sure you understand any promotional offers on a card – for example, the window available at 0% for balance transfers - and what happens once the offer ends. And are you clear about what happens if you miss a payment or make a late payment? You could find that by making with one payment a couple of days late you have to start paying interest straight away.
Also make sure you fully understand any terms and conditions so you can maximise the benefits available without penalty.
To help you decide which is the best credit card for you, use our credit card eligibility checker to see cards you’re likely to be eligible for.
On average it can take less than 3 minutes to complete a credit card eligibility check through Compare the Market based on data in March 2022.
How to choose the best credit card for you
Do you need to buy something expensive?
Useful if you know you’re planning a large purchase like a new sofa or boiler, a 0% purchase card allows you to spread the payment over a number of months without paying interest. Essentially it gives you a short-term loan. But you’ll need to pay off at least the minimum amount each month and the whole of the outstanding amount before the 0% deal ends to avoid paying interest.
Do you want to pay off debt?
You can move debt from an existing credit card (or cards) onto a new balance transfer credit card and pay no interest on what you move for a set period of time. But you could be charged a balance transfer fee – often a percentage of the amount of money you want to move. The advantage of this type of card is that once the fee is paid, your repayments go towards reducing the debt rather than paying off interest. But If you don’t pay off at least the minimum amount each month, and the entire outstanding amount before the 0% deal ends, you’ll be charged interest.
Do you have a low credit score?
You can choose a card designed to help you improve your score by proving that you can borrow responsibly. Credit builder cards can be the best first credit card for people who’ve never borrowed, just turned 18 and have no credit history. They can also be suitable for those who haven’t got a great credit score. In return for offering you a card, providers will minimise their risk with low spending limits and higher interest rates. Once you’ve rebuilt your credit rating and shown you can borrow responsibly you could consider a different type of card.
Do you want rewards for your spending?
If you always pay your bill in full every month, a rewards card can offer you a little bonus for using it. Rewards can vary from points to go toward the cost of flights, or money to spend in stores. Cashback cards work in a similar way, but instead of points you get money direct into your bank account. This type of card can work well for loyal shoppers, especially if you shop around to find credit cards with the best offers. But don’t forget to check that card fees aren’t outweighing any rewards you get.
Why should I use the credit card eligibility checker?
Use our eligibility checker if you want to see how likely it is that you’ll qualify for a card before you apply for it, without impacting your credit score. On average, it takes under 3 minutes to check. The results can help you to avoid applying for any credit cards that you’re likely to be turned down for.
Applying for multiple credit cards and having the applications denied will impact your credit score, and this is likely to make it harder for you to borrow money in the future. So, seeing what cards you’re likely to be accepted for makes sense.
To use the eligibility checker, you just need to give us some information, including:
- your personal details
- UK address history
- annual salary and other income
 Correct as of March, 2021.
How do lenders decide whether to give you a credit card?
When you apply for a credit card, the lender has some big decisions to make. They won’t just hand you a card with no questions asked. Firstly, they have to decide if they’re willing to give you a card at all. They’ll then weigh up how much you can borrow and how much interest they’ll charge you. They’ll look at things like:
Your income – you’ll need to give details of your annual salary and any other money you have coming in.
Your credit score – the lender will carry out a hard credit check to find out how trustworthy you’ve been in the past at paying back money you’ve borrowed. This will leave a mark on your credit file and could impact your credit score.
The amount of debt you have - the provider will want to feel confident you can afford to pay back any money owed on your credit card.
Use our eligibility checker to get an idea of whether you’ll qualify for a card before you apply, to avoid impacting your credit score.
What are the minimum requirements for applying for a credit card?
You must be 18 years old or over. For some credit cards, you might need to be 21 to apply. You also need to be a UK resident with full rights to live in the UK. Some cards or providers will set a minimum income too.
Do I need a credit card?
You don’t have to have a credit card, but they can:
- be useful for emergencies
- give you some financial flexibility
- reward you with freebies, air miles or cashback
- be used abroad
- help build your credit score if you use them well
What is representative APR?
The representative APR shows the interest rate for the way the card is most commonly used, as well as fees you’d automatically have to pay, like an annual fee or balance transfer fee.
Some cards will have different interest rates for different things, like purchases or cash withdrawals. And at least 51% of successful applicants must be given the representative rate.
The representative APR is really useful as it enables you compare the true cost of a credit card from different providers. It could help stop you being seduced by a card with a low or average purchase rate which stings you with a hefty annual fee, for example:
|Card A||Card B|
|Purchase rate (variable)||22.2%||22.9%|
|Representative APR (variable)||96.7%||22.9%|
So here while the purchase rate for Card A is slightly lower the impact the annual fee makes on overall costs can be seen in the Representative APR – helping you compare the two deals much more easily.
About Compare the Market
We know comparing insurance and utilities isn’t much fun. So at Compare the Market it’s all about keeping it simple. We help you find the right product at the right price. And you can trust us to be impartial – we only make money when you switch or take out a new product, so it’s in our interests to help you make the right choice. Comparing with us is about the enjoyable stuff too – we love to reward you with Meerkat Meals and Meerkat Movies when you take out selected products with us.*
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Search for the right insurance for you, at the right price, with our comparison service. Plus, we could help you save on broadband, mobile phones, credit cards, mortgages, loans and more.
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So you can see our cheapest deals, we order our results from the lowest to highest with no bias towards providers. We work with many of the UK's top providers to help you compare our best credit cards and find the right one for you.
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Credit card pros and cons
|Can offer cheap borrowing||Some cards will allow you to make purchases and pay no interest while you pay back over several months. Others allow you to move credit card debt (for a fee) and pay no interest on the transferred balance for a set period, meaning all your payments go towards the debt so you can pay it off faster.|
|Can prove your credit worthiness||If you manage your card responsibly by making repayments regularly and on time, and not going over your limit, it will show lenders that you are responsible with money. This can make them more willing to lend you larger sums – like a mortgage.|
|Can give you extra rewards on what you’d spend anyway||Rewards cards can give you cashback or rewards for money that you would have spent anyway. You can be quids in as long as you pay your bill in full every month.|
|Can give you extra protection on what you buy||Under section 75 rules, anything you buy on a credit card that costs £100 to £30,000 could makes the credit card provider jointly liable with the retailer for the whole sum if something goes wrong.|
|Section 75 isn’t a 100% guarantee||There isn’t an automatic legal right to receive money back through chargeback or Section 75. This will depend on all the relevant facts, including the supplier’s terms and conditions as well as the Mastercard or Visa scheme rules and the approach from the card issuer.|
|Can offer temptation||If you’re already struggling with debt, or can’t trust yourself not to spend up to the limit, then a credit card could add to your problems.|
|Can create persistent debt||If you pay your card late miss payments, lenders will consider you more of a risk. They may not lend to you at all or might charge you higher rates on your borrowing.|
|Can damage your credit score if not well managed||If you pay your card late miss payments, lenders will consider you more of a risk. They may not lend to you at all or might charge you higher rates on your borrowing.|
Frequently asked questions
How do credit cards work?
You can use a credit card to buy goods and services, much like you’d use your debit card. The main difference is that, when you spend on a credit card, you’re borrowing from the card provider instead of spending your own money.
You’ll be given a limit as to how much you can spend on the card by the card provider. Depending on how big a risk they think you are for paying back what you borrow, the limit may vary from a few hundred pounds to thousands.
If you use your card to make cash withdrawals, you’ll have to pay interest from the day you borrow the money. You may also have to pay additional charges for borrowing cash.
If you pay your bill in full every month, the good news is that you won’t pay any interest for any purchases. But if you pay only the minimum amount, you could end up paying more in interest, fees and charges than you originally borrowed. It’s advisable, if you can afford it, to pay more than the minimum payment as this will help you pay off your debt sooner and make your borrowing cheaper.
Each month, your card provider will send you a statement (online or by post) telling you how much you owe. It will also show:
- any fees charged
- how much available credit you have left
- the minimum payment needed and the date it’s due.
You can make sure your payment always reaches your card provider in time by setting up a Direct Debit from your bank account. Late payments and non-payment will affect your credit rating.
A few cards also charge you a monthly or annual fee. Every credit card is different and so charges and fees will differ – always read your terms and conditions with care.
What are the benefits and downsides to using credit card?
Credit cards have many benefits, but they’re not always the right option. Let’s take a closer look at some of the things to think about before using one to pay.
- Spread the cost – if you suddenly find you need a new boiler or an expensive car repair, you could pay on your card. Spreading the repayments over a few months can make it more affordable in the short-term – but you’ll pay interest on top.
- Widely accepted – credit cards are easy to use and are accepted in more places than prepaid cards and charge cards. Some cards also offer rewards like air miles, cashback and reward points for your spending.
- Safer than cash – if your card is stolen, you can cancel it with the provider. If it’s used fraudulently you might be able to get your money back too, unlike stolen cash.
- Debts can soon mount up – people can get into serious debt when it comes to the misuse of credit cards. You should use them carefully, not spending more than you can afford to pay back.
- High interest payments – credit cards can have high rates of interest that can make purchases far more expensive if you only make the minimum repayment - and it’s important to be aware of fees and charges. Find out more about some of the credit card charges that you might have to pay.
- More expensive than other options – depending on how much you want to borrow and for how long, a personal loan can be a cheaper option as the interest rate can be lower than a credit card, depending on your credit rating. See more on personal loans.
Why might I be rejected for a credit card?
Your credit history, also known as your credit report or score, is a major factor in determining if you’ll be accepted for a credit card. Lenders will take your score and use it to judge how likely they think you’ll be able to repay debt on a card. Learn more about credit building cards.
It’s worth knowing that you may be asked to pay higher interest rates if a lender sees you as a higher risk. Each lender will have their own reasons for the rates they set and so understanding what’s in your credit file is a good place to start.
If you’ve been rejected for a card, wait at least three months before you apply again. In the interim, do what you can to improve your credit score. When you apply again, use our eligibility checker to see which cards you’re likely to be accepted for.
What does APR mean?
The annual percentage rate (APR) tells you how much your borrowing will cost you over the course of a year. It includes the interest rate and any other standard charges, like the annual fee. Learn more about APR.
For most cards, you can avoid interest payments on transactions if you pay your balance in full each month by the due date.
Why should I pay off more than the minimum fee each month?
It sounds obvious, but the more you pay the faster your debt will disappear, so always aim to pay more than the minimum payment due. The minimum payment is the lowest amount you need to pay to avoid potential penalties. The minimum fee is usually calculated as a percentage of your balance.
Don’t think of it as a fixed amount as it’s not. The amount you need to repay each month as a minimum will fall as your balance reduces. See how this works in the table, and how paying more than just the minimum can reduce the time to clear the debt and the overall interest you need to pay. This table assumes spending no more money on the card and the interest staying the same for the whole period.
£1,000 balance on card – 20% APR
Time to clear debt
Minimum repayment only (starting at £25 and decreasing as the debt goes down)
18 years and 7 months
£25 every month until debt cleared
5 years and 3 months
£40 a month
2 years and 8 months
£100 a month
How can I check my credit score?
The three main credit reference agencies are Experian, Equifax and TransUnion (formerly Callcredit). These all have information about you that lenders can see before making a decision on offering you credit. Ideally, you should check with all three to ensure the information they have about you is correct, as different lenders use different agencies. It’s free to check your credit score online. You may have to pay a fee for additional services, like credit monitoring.
Lenders will carry out a hard search on your credit report every time you apply for a credit card. Too many hard searches on your file might make it look like you’re desperate for credit. A soft search – which you can see on your credit file but lenders can’t – is a way to find out which credit cards you’re most likely to be accepted for without your credit score being affected.
See more about building your credit score.
What can I use a credit card for?
You can use a credit card to pay for bills and services. If you use a card to make cash withdrawals, you’ll start paying interest right away.
However you use your card, it’s important to be financially sensible. It’s wise to avoid paying for things like your mortgage and bills on your card, unless you’re sure you can pay the money back each month, as this can lead to a spiral of debt.
Can I get a joint credit card?
In the UK, there’s no equivalent of a joint bank account for credit cards, because just one person has to sign the credit agreement for a card. What you can do instead is add another cardholder to your card – known as an additional cardholder. They’ll get their own card, but you’ll be fully responsible for any debt on that card and all the admin involved, so there are risks. You can get an additional card for a partner, family member or friend. It’s important that you trust your additional cardholder not to run up big debts.
What happens when a car hire company or hotel asks for my card up front?
Some companies ask for pre-authorisations, so they can be sure they can collect the money owed to them if you don’t pay up – for example, if you use the mini-bar in a hotel or leave a car at the hire company without paying the bill at the time. The company puts a hold on some of your credit limit and while that’s in place you won’t be able to spend that money elsewhere. For example, if your credit limit is £1,000 and a car hire company puts a pre-authorisation of £500 on your card, you’ll only be able to spend £500 more on your card.
How can I improve my credit score?
There are several ways to build your credit score. These include registering on the electoral roll, correcting any mistakes on your credit file and paying your bills on time each month.
If you have a poor credit history, you could think about applying for a credit building card. This can help you prove you’re a responsible borrower, although interest rates are likely to be higher than a standard card, so try to pay off what you owe in full each month.
Do interest rates change?
They might well do. Most credit cards have a variable interest rate, which means the rate can go up or down at any time. Providers have the right to change their interest rates when they want, while changes to the Bank of England base rate can also affect credit card rates. That’s why it’s always a good idea to stay on top of your credit balance.
If you have a 0% credit card, you won’t have to pay any interest for a set number of months. But you should make sure you’ve cleared your balance before the introductory period ends, otherwise you’ll revert to the provider’s standard rate.
How do I apply for a credit card?
You can apply for a credit card online through Compare the Market or by going directly to the provider. You can also apply by phone, by post or in-branch.
Can I withdraw a credit card application?
Yes, you’ll get a 14-day cooling off period from when you receive your card to tell the provider you’ve changed your mind. There’ll be no penalty fee, but you’ll need to pay off any outstanding balance you’ve built on the card within 30 days.
Can I get a credit card with a bad credit score?
While the best credit card deals are offered to borrowers with flawless credit records, it’s possible to get credit cards for bad credit. Just bear in mind that they often come with high interest rates and low credit limits.
Used responsibly, this type of card can help you boost your credit score, so you could eventually benefit from credit cards with better rates and perks.
What happens if I miss a repayment on my credit card?
If you miss a repayment on your credit card, you’ll usually have to pay a penalty. You might also lose any introductory benefits, like 0% interest, and receive a black mark against your name on your credit report.
How can I get more credit?
Once you’ve proved yourself to be a responsible borrower by always repaying on time, you may automatically be offered a higher credit limit. Otherwise, you can contact your provider to ask for an increase, which you may or may not get. Be aware that a requested increase will appear on your credit file, whereas an automatic one won’t.
Can I pay off my credit card early?
Absolutely. Unlike with many loans and mortgage debts, you normally won’t be charged any fees or penalties for paying off a credit card debt ahead of schedule.
How do I cancel a credit card?
There’s a number of reasons you might want to cancel a credit card, for example:
- You’ve finished paying off the balance at the end of a 0% interest free deal
- The interest is too high and you’ve moved your balance to another card with a better rate
- You have more credit cards than you need
While it may seem to make sense to cancel cards you’re not using, it could affect your credit rating. That’s because if you cancel an old card but have outstanding balances on other cards and loans, you’ll effectively be using more of the overall credit available to you. Read about the pros and cons of cancelling credit cards.
If you want to cancel your credit card, it’s not enough to simply snip it up into tiny pieces. This just means you’ve stopped using the card, but your account remains open. You should contact your credit card provider and let them know you want to close the account. You’ll also need to pay off any balance left on your card. The account may stay active for a few days to allow for any remaining transactions to come through. Once you receive your final statement, check it to make sure the last payments are shown and the balance is fully cleared.
Once the card is cancelled, cut through the number and name and throw it away.
What is Section 75 and what protection does it offer?
Section 75 comes under the Consumer Credit Act and exists to protect your credit card purchases if something goes wrong.
Under Section 75 your credit card provider – usually your bank, not Visa or Mastercard – has equal responsibility with the seller if there’s a problem with something you bought on your credit card: for example, a faulty product. To make a claim, the purchase must be for a single item valued at more than £100 and less than £30,000. Just be aware, that there’s no guarantee your claim will be successful or that you’ll automatically get a refund.
Does Compare the Market compare all the credit cards on the market?
We have many credit cards for you to compare, from major banks and leading credit card providers. But we don’t compare every single credit card available in the UK.
That’s because some credit card providers have exclusives through their own branches or websites, or on other price comparison websites – in the same way that we sometimes do. Also, there are credit cards which are only available to people in clubs or membership organisations.
Why compare credit cards with us?
At Compare the Market we help you find and compare our best credit card deals, so that you can find one most suited to your needs. It’s super-easy to filter your choices by card type, so when it comes to finding great credit card deals for you, it won’t take long at all.
Why use Compare the Market?
Check which credit cards you're eligible for in less than 3 minutes .
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 Correct as of March, 2022.
What our expert says...
"If you can afford to, it’s always best to pay off your credit card balance in full every month. That way you’ll avoid having to pay interest and risk getting into debt. At the very least, you must pay off the minimum monthly payment. Setting up a direct debit payment could help ensure you pay on time."
- Rob Silvey, Finances expert