Credit cards are an easy way of borrowing money – they can be used to consolidate existing loans or to transfer existing debt onto them, or merely for making purchases. You will set an agreed amount of ‘credit’ with a lender and you can borrow money up to this limit. Each month, you must repay some of the debt back to the lender. If you do not repay all the debt, interest will be accrued.

To obtain a credit card in the first place, the lender will do some basic checks on you. The better your credit history, the more chance there is that you will be able to get a credit card. If you have a poor credit history, you may be refused a credit card, or you will only be given one with very high interest rates. This is because credit card companies are there to make money. If they think you aer unable to pay back the money, or that you will accrue no interest because you always pay your debt off in full each month, they will not make any money from you so you will not be offered any credit facilities.

Some credit cards will offer reward schemes when you take the card out. Some will give you loyalty points so each time you spend, you are given points back which can later be redeemed either as cash or as vouchers. Some cards offer ‘cash back’. This is when a proportion of the amount you have spent over the year is returned to you. Others offer air miles where you are given air miles each time you spend on the car.

There has been a recent trend for 0% interest cards. These cards offer you 0% interest for a given period. If you have outstanding debts, these cards are good as it gives you a chance to transfer the debt across and pay the debt back without accruing any more interest. These are also good if you are good with money as you can take the credit out and put it into a high interest bank account. When the 0% period is over, you can pay the money off and you will hopefully have made some money through the interest for the time the money was in your bank account.

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