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How does a credit card work?

(11 Posts)
jackieeee Thu 16-Feb-17 17:47:48

I have been offered a credit card, not with my bank.
Never had one before so not sure how they work. What if i spent £1000 on the card, what would happen?
Would i have minimum payments, interest, etc. Sorry if i sound think, just dont know anything about then ans i dont want to spend it and then regret it
Thanks

alltouchedout Thu 16-Feb-17 17:52:32

www.moneyadviceservice.org.uk/en/articles/credit-cards

PrincessHairyMclary Thu 16-Feb-17 17:53:57

I have mine set to £400 I spend on it for and repay it every month. I like to know that bigger purchases, bikes are insured after purchase. When my credit card was cloned barclaycard informed me they thought they had identified unusual purchases and got mine money back straight away.

nannynick Thu 16-Feb-17 20:27:02

It is a way to put you in debt. It encourages you to buy now, pay later. It enables you to buy things when you don't have the money and it then charges you interest for lending you the money.
Sure you may pay it off each month before the interest kicks in but it does not do things the debit card does not do. These days you get protection buying goods/services over £100 on credit or debit card, so long as the card is part of a big network like Visa.

If you can do so, avoid getting one. I used to use mine a lot when I was in my 20's and ended up owing quite a bit.

OurBlanche Thu 16-Feb-17 20:32:14

Alternatively:

If you can be very strict about repayments it can be an easy way to build your credit rating. Getting one can using it wisely will increase your credit score and reuce some of your premiums for other servcies, make getting loans like a mortgage easier, cheaper too. And if you need to get HP for a car, say, having a CC with a good credit rating will reduce the points you pay on that too!

Now we no longer have a mortgage we use our CCs to keep our credit rating ticking over. DSis, who rents and has never had a card, found it impossible to get a loan for almost anything... 6 months of judicious CC useage and she has a rating that allowed her to get a car on finance!

But you HAVE to be certain you can manage it well.

ActuallyThatsSUPREMECommander Thu 16-Feb-17 20:35:13

If you don't have a valid reason to get into debt and a well-thought out plan to pay it back then don't.
However, credit cards can be useful if you don't treat them as a source of credit but just use them in the same way as you would use your debit cards, e.g. for your supermarket shopping, keep track of exactly what you've spent, make sure it's never more than the cash you have to hand, and then pay off the entire bill every month. That way you improve your credit rating, get improved consumer protection and get some cash back on your purchases. But you need to be very sure that you can keep a lid on it.

nannynick Thu 16-Feb-17 20:37:43

Yep you HAVE to manage it well. They rely on people not paying the bill in full each month.

If you have managed until now without one, do you really need one? You could get one anytime, you don't need to react to their marketing. You can choose to apply for one anytime you like.

MirandaWest Thu 16-Feb-17 20:40:41

We have a credit card which we use for supermarket shopping and fuel buying. Transfer the amount we spend on the credit card from the current account into savings account as soon as we spend it and then get points that turn into amazon vouchers.

I've been irresponsible with credit before in the past. Paying the minimum payment isn't sensible. But what we're doing is fine.

nannynick Thu 16-Feb-17 21:34:35

If I don't pay the full balance every month by the due date, the following fees apply.

Late payment fee: £12
Monthly interest from the date of the purchase, 1.313% (16.9% Annual) with interest charged daily.

If you use the card to obtain cash, the Annual interest rate is 23.9%

Interest rates vary between providers and they have introductory offers. If you manage the account well then you won't get fees but if you fail to pay in full one month, then fees start applying.

kath6144 Fri 17-Feb-17 10:52:56

Nannynick - a Credit card doesn't have to cost money, if used properly. We have had them for years, pay off in full via DD and have never paid a penny in fees or interest.

As per an earlier poster, we have no mortgage so use them for credit rating and convenience, as they do give better protection than debit card.

Our DS recently started uni and got a CC with his student account. He has an inheritence so will probably be looking at buying a house earlier than most of his contemporaries. We therefore encouraged him to keep the card but use it minimally, to aid his credit rating for when he wants a mortgage, and helped him set up a DD to clear it monthly.

He uses it solely to pay for train tickets home and the DD to pay it comes from a different account to his main student account. His bill is usually £15-£20/month, max, but he is getting the benefit of building his credit rating. He is sensible generally but also aware of the risk of using it carelessly.

Op - only you can decide whether using a CC would be good for you, depending on why you want it, what you would use it for, your spending habits generally and whether you will pay it off monthly.

BarbaraofSeville Fri 17-Feb-17 14:08:13

You can also get credit cards that pay cashback. We put just about all our your normal spending on a credit card and pay the bill off in full every month by direct debit, which earns around £100-200 per year in cashback.

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