2.3 Introduction to interest and fees for credit cards

A credit card account is a service provided to you by the credit card provider and is therefore not going to be free.

When you borrow money on your credit card you will be charged interest until you have paid the money back.

The amount of interest you are charged will depend on the APR applied to the credit card (see section 5.1 ‘What is APR?’).

In basic terms, you will pay back the money you borrowed plus a percentage of the money you borrowed as payment to the credit card provider for the credit facility.

After loans, credit cards are generally the next cheapest form of borrowing. Sometimes the cost of low level borrowing on credit cards can even be cheaper than taking out a low level loan. Store cards and store credit are probably the most expensive ways to borrow money, excluding ‘doorstep’ loans.

There are ways to minimize the amount of interest you pay including taking out credit cards with interest free periods and choosing cards with lower interest rates. We will tell you about these in more detail in other sections of this guide (section 5.7 ‘How to lower your credit card APR').

If you abuse your credit card account by making a payment from an account with insufficient funds, going over your credit limit, paying your bill late, or missing payments, the provider will charge you a penalty fee.

Back to Guide to Credit Cards Contents

Product Offers
Please ensure that you fully read the terms & conditions of any product or policy before you decide to proceed and are fully aware of the total costs and the benefits and any exclusions or limitations applicable to the product or plan.

Please note that the product links will take you direct to the Issuer or Insurer's site direct and we cannot be held responsible for the information which they provide within their own sites. On some comparison tables we use a star rating which rates products by visitor popularity.