Credit Cards Explained
How they work, when they beat a loan, and the traps to steer around.
Almost every shop, website and bill now takes a credit card, which makes them one of the most flexible ways to borrow. Used well, a card can cost you nothing in interest. Used badly, it can be one of the slowest debts to clear.
Credit Cards Versus Loans
| Feature | Credit card | Personal loan |
|---|---|---|
| How you get the money | Spend up to a limit, as and when you need it | One lump sum paid into your bank |
| Repayments | A minimum each month, or more if you choose | The same fixed amount every month |
| End date | None – you can keep borrowing | Fixed from the start |
| Interest | None if you clear the full balance each month | Charged from the day you borrow |
| Best for | Smaller, ongoing costs you can clear quickly | A known amount you want paid off by a set date |
With a poorer credit history, card rates can sometimes work out lower than loan rates – but only if you keep the balance down and pay it off, rather than sitting near your limit.
Getting A Card, Step By Step
Check eligibility
Most card providers offer an eligibility checker that uses a soft search, so you can see your chances without affecting your credit score.
Apply
The full application runs a hard credit check, and the decision, along with your credit limit, usually comes back quickly.
Wait for the post
The physical card normally arrives within a week or so – the one part of the process that can't be rushed.
Activate it
Confirm a few security details in the provider's app or by phone, and the card is ready to use.
Know The Traps
The minimum payment
Paying only the minimum keeps your account in order, but most of it goes on interest, so the balance shrinks very slowly. If you pay more in interest and charges than off the balance for 18 months, your provider has to contact you, and it must step in further if that carries on for three years.
Cash machine withdrawals
Taking cash on a credit card usually costs a fee plus interest from the very first day, and it can be noted on your credit file. Future lenders may read it as a sign that money is tight.
The end of a 0% deal
Interest-free and balance transfer offers last for a set period, and transfers usually carry a fee. When the offer ends, any balance left moves to the card's normal rate.
The Hidden Extras
Purchase protection. When you pay for something costing between £100 and £30,000 with a credit card, even partly, the card provider is equally responsible if the goods never arrive or the seller goes bust. This is known as Section 75 protection, and loans paid into your bank don't give you it.
Credit builder cards. If your credit history is poor, a card with a small limit, sometimes only a couple of hundred pounds, that you use lightly and repay in full every month is one of the steadier ways to show lenders you can manage credit.
Using it abroad. Your card will work overseas, but watch for fees on foreign spending and cash withdrawals, and let your provider know you're travelling so it doesn't block a payment.
Credit Card Questions
Does Quick Loans offer credit cards?
Not any more. We now arrange unsecured personal loans only, so for a credit card you would apply to a card provider directly. If you'd rather have a loan, see our loans page.
Is a credit card really interest free?
On purchases, it can be. If you pay the full statement balance by the due date every month, most cards charge no interest at all. Leave any balance unpaid and interest is added, usually at a higher rate than a bank loan for someone with good credit.
Why is my APR different from the advertised one?
Card providers set your rate from your credit history, so two people applying for the same card can be offered quite different rates. The eligibility checker usually gives you an idea before you apply.
Do I need a guarantor for a credit card?
No. Credit cards are in your name alone, and nobody else signs for them.