Credit Cards

Understand the world of credit cards

Why is Having a Credit Card Important

Credit Cards enable you to borrow money in order to make purchases, and then repay the money you borrowed at a later date. Having a credit card is valuable as it can help to build your credit history over time, paying back the balance on time indicates to lenders you are able to manage your finances and credit. It also provides you with a higher purchasing power, you have the funds when you need it, particularly in emergencies. 

Often credit card providers come with rewards, such as cashback, but you must be careful to ensure the cost of the card does not outweigh the rewards.

In cases where you need to manage your debt, balance transfer credit cards allow you to move the balance without paying interest, some transfer cards have a 0% interest for a short period of time for you to manage your debt without the added interest to your repayments.

There are various advantages, and many more, in having a credit card. To know what type of credit card is best for your circumstances, decide on how you plan to use your card, a payment method (e.g. direct debit) and amount, and remember to spend responsibly. For further assistance please contact us on what is the correct path for you. 


What is a Credit Limit

A credit limit shows you how much you are able to borrow on a credit card, and this will allow you to manage your credit. When it comes to rebuilding your credit, you may have a low credit limit to enable you to do so. This limit is set by your provider once you have completed your application, based on various factors such as how much credit you are currently borrowing, how many credit cards you have, any missed or late payments, etc. Your credit score and report is another defining factor in your credit limit. 

Your credit limit can also become increased or decreased based on your situation, and you will need to speak to your credit card provider to change the limit. Increases to a credit limit is often based on the points mentioned before, your payment history, but you must be certain you can make the repayments. For decreases in the limit, it will reduce the amount of unused credit, which can be useful when applying for future credit. It is recommended you do not request for a credit limit increase soon after obtaining a credit card, instead maintain a credit limit you can handle to manage it effectively. 

Annual Percentage Rates

The Annual Percentage Rate (APR) refers to the total cost of your borrowing on a card/loan for a year as a percentage. It allows you to see the interest rate you would be charged annually for borrowing, and other fees that come with the credit. The lower the APR, the better as you will pay less interest, leading to cheaper borrowing. 

The APR for credit cards depends on numerous factors such as your credit score and the type of credit card, a better credit score means you are more likely to get a lower rate for credit cards. 

APR rates for loans and credit cards are often variable rates, the most common type of APR, a rate linked with the Bank of England base rate. Unlike a variable APR, fixed rate APR's do not change during the credit agreement, so you will know exactly how much interest you will need to pay. Some credit cards use introductory rates, a lowerrate than usual in order to attract consumers, but will increase to the normal rate after a period of time. If you are borrowing cash on a credit card, additional fees and higher rates of interest can lead to a high APR.