A credit card allows you to borrow money from a financial institution or credit provider to make purchases or pay for services, up to a certain limit, known as your credit limit. Unlike debit cards, which withdraw money directly from your bank account, a credit card gives you access to a line of credit, essentially lending you money that you agree to pay back.

Each month, you're required to make at least a minimum repayment, but you can choose to pay more or even pay off the full balance if you prefer. The amount you borrow can be repaid over time, offering you flexibility in managing your finances. If you carry a balance beyond the due date, you’ll typically incur interest charges, which can be quite high.

Credit cards can be used for everyday purchases or larger expenses, and they often come with rewards, benefits, and protections for your purchases. However, it’s important to manage your spending and repayments carefully to avoid accumulating debt and paying high interest rates.

Credit cards work by linking the physical card, or account number for online spending, with the borrowing facility - that means when you pay with a card, it's your provider that pays the cash to the merchant.

As you use your credit card, you'll build a balance of debt that you owe to the provider. Every month you're expected to repay the debt that you've accrued by using your credit card.

Here you have some options:

• You could pay off the whole balance in full, taking your balance to zero. Doing this ensures that you won't be charged interest on balance you had built up.

• You could choose to pay off a part of the balance, and roll over the remaining balance into the next month's billing cycle. Here you'll be charged interest on the remaining balance, which will be added to next month's balance.

• You could pay just the minimum monthly payment, which is the minimum amount your provider expects you to repay every month. Sometimes that's a flat charge, but usually it's a percentage of your balance. Making this payment is vital, as missing it will hurt your credit score.

To be eligible for a credit card in the UK, you must be:

• At least 18 years old

• a legal UK resident

The first decision providers make is whether to offer a credit card at all. Then they figure out how much to let you borrow - your credit limit - and at what interest rate - the APR.

For this they consider three factors:

• Your income: You'll need to provide details about your salary and any other regular income you get from other sources.

• Your credit score: The lender will carry out a hard credit check to find out how responsible you've been in paying off credit in the past. This will leave a mark on your credit file and may possibly affect your credit score temporarily.

• Existing debt: Providers want to know how much debt you already have to see if you can afford to take on more debt and repay it.

How to choose the best credit card for you

1. Check your credit score – Review your credit file first. If your score is low, you may want to improve it before applying to access better rates.

2. Check your eligibility – Use an eligibility checker before making a formal application. This runs a "soft check" that tells you your likelihood of approval without hurting your credit score.

3. Compare the costs – Read the terms and conditions carefully — specifically the representative APR and any annual fees — to ensure the card is affordable.

4. Prepare your documents – You will generally need to provide your employment details, annual salary, and three years of address history.

5. Submit your application – Enter your details accurately. Inconsistencies (like a typo in your address) can lead to rejection.

6. Receive a decision – Most online applications give an instant decision on your screen. However, some cases are referred for manual checks, which can take a few working days.

The benefits

• Purchase protection: Under Section 75 of the Consumer Credit Act, purchases costing more than £100 and up to £30,000 are protected. If the company goes bust or the goods are faulty, the card provider can reimburse you.

• Build credit history: Using a card responsibly and paying it off on time proves to lenders that you are reliable. This can boost your credit score and help you get a mortgage or loan in the future.

• Interest-free borrowing: If you pay your balance in full every month, you can borrow money for up to 56 days without paying a penny in interest.

• Rewards and perks: Many cards offer cashback, air miles, or loyalty points on your spending, giving you extra value on purchases you would make anyway.

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