Written by
Amy Buxton, Financial Trend Guru
, 6 December 2017

The topic of credit cards always raises a lot of questions and rightly so. After all, bad management of a credit account can have a devastating effect on credit scores, so it’s important to know as much as possible before even considering submitting a credit card application.

See below for credit card FAQ answers:

1. What is APR?

APR is short of annual percentage rate and refers to the amount of interest you will pay on every
purchase. This is a very important number to understand, as the higher it is, the more your purchases
will actually cost you, if you don’t clear the full balance of your credit card every month. A lot of credit
card providers add different rates for individual purchase types, so be sure to read your small print.

2. What is a balance transfer card?

Popular with people who have debt on other cards that they want to consolidate into one place, balance
transfer cards offer an extended period of interest-free transfers so that every penny owed can be on
one single card that is easier to manage and pay off. Be aware that a one-off transfer fee might still be
applied.

3. What are minimum repayments?

We recommend that you pay your credit card off in full every month, but if you can’t manage, you will
be expected to make a minimum repayment. The amount that this refers to will be set by your card
issuer, but is usually around 10% of your total balance. It is not a good idea to only pay the bare
minimum off, as you will prolong your debt and incur interest charges as well.

4. What is a credit limit?

This is the amount of accessible money you will have on a credit card. Your personal circumstances,
including your earnings, will be taken into account when this limit is calculated, so the more you earn
and the better your credit is, the higher your limit will be. Credit card companies have come under
scrutiny in the past for allowing people very generous credit limits that then gets them into trouble
when the minimum payments were even too much to cope with. 

5. What does your credit score have to do with credit cards?

When you apply for a credit card, your potential card issuer will use your information to run a check on
your financial situation. The lower your credit score is, the more it will imply that you have trouble
living within your means or that you have outstanding debt already and might not be able to keep up to
date with card repayments. A high credit score will normally mean that you are accepted and offered a
card with a competitive APR.

6. Does it cost anything to take out a credit card?

Most credit cards are free to apply for and use, but certain providers will charge a monthly fee for cards
that offer benefits and perks. Reward cards generally come with a monthly fee, just like reward current
accounts do. High limit credit cards will always have a monthly fee.

Written by
Amy Financial Trend Guru
, 6 December 2017

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