Advice from the pros: How to master credit card types, applications, fees, and charges

Credit cards are widely popular in the UK, with millions of people owning at least one card. They’re accepted in various establishments and provide convenience for transactions in retail stores, restaurants, and online.

Numerous providers, including banks and credit card companies, offer a wide range of options to suit your individual needs. Credit cards offer secure payment methods and eliminate the need to carry cash. They also enable you to build a positive credit history.

How to master fees and charges on credit cards

Understanding your credit card fees and charges is crucial for enabling wise spending. Pay attention to the following:

• Annual fees: Some credit providers may charge an additional yearly fee. The latter will depend on the card issuer and the benefits on offer.
• Interest rates and APR: You accrue interest on any outstanding balances that are not paid in full by the due date. The Annual Percentage Rate (APR) represents the cost of borrowing and is determined by factors like creditworthiness and the type of card.
• Balance transfer fees: When transferring a balance from one credit card to another, some cards may charge a balance transfer fee, usually a percentage of the transferred amount.
• Cash advance fees: If you use your card to draw money from an ATM or for a cash advance transaction, you’ll have to pay a cash advance fee. The latter comprises a percentage of the cash advance amount and is charged together with the interest that accrues on the cash advance.
• Foreign transaction fees: Using a credit card for purchases made in a foreign currency or outside of the US may incur foreign transaction fees.
• Late payment fees: Failing to make at least the minimum payment by the due date can result in significant late payment fees.
• Over-limit fees: Some credit issuers charge over-limit fees if you exceed your credit limit. However, The Credit Card Act of 2009 requires cardholders to opt-in for over-limit fees, therefore card issuers cannot charge this fee without prior consent.

Discover your perfect match

A wide variety of credit cards are available in the UK to suit every need and preference. These include:

• Standard credit cards that offer a predetermined credit limit, allowing you to make purchases and repay the borrowed amount over time.
• Balance transfer cards enable you to transfer your existing credit card balances to a new card with a lower or 0% introductory interest rate for a specific period.
• Rewards credit cards offer rewards programmes where you can earn points, miles, or cashback on your purchases. You can redeem your rewards for various benefits.
• Cashback credit cards offer a financial incentive in the form of a percentage of the amount spent as cashback.
• Travel credit cards provide benefits such as air miles, travel insurance, airport lounge access, and discounts on travel-related expenses.
• Premium credit cards cater to high-income individuals, as they offer exclusive perks such as concierge services and higher credit limits, to name but a few.
• Student credit cards offer lower credit limits to students.
• If you’re an entrepreneur or small business owner, business credit cards provide you with expense management tools, rewards for business-related spending, and a host of other features to help you separate your personal and business finances.

Unleash your financial potential by making the right choice

Make sure to choose the right credit card for your specific needs by looking at factors such as rewards, benefits, additional perks, the applicable fees and interest rates, and card limits. A higher credit limit might look attractive but it’s important to exercise financial discipline so that you would be able to repay the borrowed amount. Always look for the cardholder protections on offer such as fraud liability limits and associated dispute resolution processes.

Trending credit cards in the UK

• Aqua
• Vanquis
• Capital One
• Easy loans 

Your credit card interest represents the cost charged by the credit provider for borrowing the money. Also known as the Annual Percentage Rate (APR), it can range from 18% to 24% depending on the issuer and type of credit card.

Interest is charged on a daily basis. Calculation methods vary among card issuers but generally involve dividing the APR by 365. This daily interest rate is then multiplied by the outstanding balance to determine the daily interest rate. Paying the full statement balance by the due date will minimize interest charges.

Key eligibility requirements for applying for a credit card in the UK

Although the requirements can vary among card issuers, the most common criteria include:

• A minimum age requirement of 18 years.
• You have to be a UK resident, although EU nationals or non-UK residents who have a UK address, can also qualify for certain credit cards.
• Your income level must be such that you would be able to make timely repayments.
• You should have a solid credit history, as this will improve your chances for approval.
• You might have to subject yourself to an affordability assessment in which your income, expenses, and existing debt will determine acceptance by the card issuer.

How to apply for a credit card in the UK

1. Research and compare all the various credit card options carefully.
2. Check your credit score:  A higher credit score increases your chances of getting approved for a card with better terms.
3. Gather the necessary documents such as your identification (such as a driver's license or passport), Social Security number, proof of income, and possibly additional information depending on the issuer's requirements.
4. Fill out the application: Visit the website of the credit card issuer you've chosen or go to a local branch if applicable. Fill out the online application form, providing accurate and complete information.
5. Wait for a response: Once you've submitted the application, the issuer will review it. You can usually expect a decision within a few business days.

Remember to read and understand the terms and conditions associated with the credit card you choose carefully.

The five principles of responsible credit card usage

1. Make timely payments to avoid late fees and interest rates. A good practice is to create automatic payments or reminders.
2. Aim to keep your credit card balance well below your limit. This demonstrates financial discipline. Ideally, your credit utilization should be below 30% of your available credit.
3. Avoid unnecessary debt by only using your card for planned purchases. Never use it to cover day-to-day expenses.
4. Review your statements regularly and report any discrepancies immediately.
5. Stay mindful of the fees and charges and make sure you understand how interest rates apply to different types of transactions.

By adhering to a number of key principles, you’ll be able to use your credit card responsibly, build a positive credit history, avoid excessive debt, and enjoy the benefits and convenience that these cards offer.