Manage your credit card debt

Credit Card Guide

Credit cards: who can imagine life without their ‘flexible’ friends? There’s no doubt that credit cards are a quick and easy way to pick up the tab for a night out or  pay for those designer shoes we simply must have – now.

But let’s not forget that credit cards are not the same as debit cards. When you spend on a credit card you are potentially spending money that you don’t have, so you could run up an expensive debt.

How do credit cards work?

Credit cards allow you to buy something now and pay for it later – you are essentially borrowing money. You will receive a statement each month and if you pay off the balance in full within the agreed time – usually 56 days – there will be no interest to pay. If you can’t clear the debt, you will be charged interest on the amount you owe. Interest rates vary between lenders, so you should always shop around for the best deal. Most cards these days do not charge an annual fee, but it’s always worth checking, just in case. 

What type of card is best for me?

Different cards suit different people, so you need to think first how you will use the card. If you intend to pay off the balance in full each month, then the interest rates are largely irrelevant. Instead compare cards that give you cashback or other incentives.

If you aren’t such a goody two shoes, then you need to scrutinise the interest rates. Customers who like shopping should pay close attention to the rate of interest on purchases. People who want to juggle their debts and transfer a balance from an existing to a new card should compare the balance transfer rates. Or you might want to transfer a balance and go on a shopping spree, in which case both the purchase and balance transfer rate are important.

A word of warning: never use a credit card to withdraw cash as the fees and charges tend to be high. You should also be wary of using a credit card abroad as most firms levy costly foreign usage fees. If you are planning an overseas trip, a pre-paid card is a possible alternative.

What about 0% cards?

A number of cards charge zero interest for an introductory period, typically about 12 months. The 0% rate will apply to purchases, balance transfers, or sometimes both, so you need to check the details carefully. A 0% card can be a great way to manage your debts, but you must make sure you clear any outstanding balance by the time the deal expires; otherwise you will start to rack up debt at a higher rate of interest.

Is a credit card right for me?

Credit cards are convenient - and they don’t have to be expensive. But they are not for everyone. A credit card should primarily be used for one-off, big ticket items, such as a holiday or a washing machine. It’s well worth using a credit card for purchases of £100 or more because you have greater protection than if you pay with cash or a debit card. Under Section 75 of the 1974 Consumer Credit Act credit card issuers and retailers take joint responsibility for faulty purchases between £100 and £30,000. If the retailer goes bust or the goods are faulty when they arrive you can claim a refund from the card issuer.

If you regularly use your credit card to pay essential bills, such as food and energy, you should probably seek some debt advice. Credit cards are also best avoided if you are forgetful and lack financial discipline as charges for late payment can be high. And if you can only afford to make the minimum payment each month, it will take years to clear your debt. A personal loan might be a better option if you want to spread you payments over several years.

Top tips

If possible, clear your debt in full each month. If you can’t afford to pay off the whole balance, at least pay more than the minimum payment.
It’s a good idea to pay by direct debit - that way you will always pay on time and avoid incurring a late payment fee.


Don’t use a credit card to withdraw cash from an ATM – you’ll probably be charged a higher rate of interest than on purchases, plus a withdrawal fee.

Keep an eye on your spending and make sure you stick within your agreed credit limit.

View our Guide to Credit Cards