Guide to credit cards

A credit card is a form of borrowing that lets you buy things up to a pre-arranged limit and pay for them later, either in one go, or by instalments. It's important to work out if a credit card is the best way for you to borrow money. It's also worth remembering that you are credit scored when you apply.

Credit cards can be an expensive way of borrowing. You should try to pay your balance in full every month. If you are unable to do so, make sure you pay the minimum payment. Missing a payment can result in interest and charges and may affect your credit score. 

You can use credit cards to withdraw cash from cash machines but you might be charged a higher rate of interest for this service. Cash advances usually attract a handling fee of around 2% of the amount withdrawn.

Interest rates vary greatly between cards so check carefully before deciding which one is right for you. You may get an introductory interest rate for balance transfers, purchases or even both. Always check what the rate will be at the end of the introductory period as this could rise dramatically.

If you make purchases using your card and don't pay off your balance in full each month, you will have to pay interest unless you have an 'interest-free' introductory offer. If you only pay off the minimum required each month, credit cards can be an expensive form of borrowing.

You may wish to consolidate your existing credit and store card debt by transferring your balances to another new card with a lower rate of interest, especially if there is an interest-free introductory period on the new card.

This could help reduce your monthly credit card payments and/or clear your debt quicker. There will usually be a fee to transfer a balance and it's very important to know how much this will cost you, before you apply for a new credit card.

Calculate how long you think it will take to clear your debt before committing to another credit card. Some cards may offer balance transfers for a lower fee, but these may come with a shorter interest-free introductory period. 

More on transferring a balance to an Ulster Bank credit card

Store cards are issued by retailers and operated on their behalf by finance companies. They are similar to credit cards in that you can use them to buy goods and services and you can choose to pay off the whole balance every month or a smaller amount.

Some retailers offer interest-free credit as long as you clear your balance within a certain period of time. Be careful with these deals because if you fail to pay on time you could find interest backdated to the date you made the purchase in the first place.

Store cards generally have a higher interest rate than credit cards but may be useful if they offer discounts for goods purchased at certain times of the year - as long as you pay your balance in full at the end of the month.