Introduction to credit
What is credit?
Well, to put it simply, credit is any arrangement where you buy goods or services now but you agree to pay later. This section aims to provide you with an introduction to the different types of credit available and help you make sense of some of the jargon you'll come across.
Credit comes in many different shapes and sizes including mortgages, loans, overdrafts and credit cards. In most cases you'll have to pay an agreed amount back every month with interest. Whatever credit you choose, it's important to keep up with your monthly repayments. Now that you are familiar with what credit is, lets have a look at the different options.
What is a credit card?
A credit card is issued by a credit card provider, like Capital One, and they are designed to pay for things in shops or online. You can also use credit cards for balance transfers and taking out cash (also known as cash advance or cash withdrawal) from an ATM.
You can use your credit card worldwide as they are accepted in millions of places at home and abroad, so they are very handy in any language. There are often fees or charges for using your credit card overseas, so check you credit card agreement before you go.
When you get a credit card you will be given a credit limit. This is the total amount you have available to spend using the credit card. You should always leave some available credit on your credit card for any interest to be applied.
Details of all transactions you make will be shown on your statement, along with:
the minimum amount you must pay
the date by which your credit card provider must receive at least your minimum payment
If you do not pay off your balance in full each month, you will be charged interest on the amount remaining on your account. Check your credit card agreement to make sure you know how much you will be charged.
Credit card application
There are a lot of credit cards out there today; in fact, it seems there are new credit cards popping up all of the time. There may seem like there is a lot of choice, and it can be a little daunting. All credit card providers are slightly different, so it's worth taking the time to find the best match for you.
Some credit cards are great for making purchases, some offer deals for balance transfers, but one thing all credit cards have in common is they need to be used sensibly.
To apply for a credit card you have to be at least 18 years old, and your application will be based on a number of factors including your credit worthiness.
Each credit card provider will be looking for different things but they will all look very closely at what you say on your application form and your credit history. Remember, when applying for credit cards always:
Check the eligibility criteria - this will give you some idea of whether you are likely to be accepted or not
Answer all the questions truthfully, remember lying on your application form is fraud