• Credit Cards Explained

    For all you need to know about credit cards, whether it's to find out how credit cards work or the fees and charges associated with them, please take a look at our explanations below. Once you've found the information you're after, you can find out more about applying for a TSB credit card on our Credit Cards page.

  • What is a credit card?

    Credit cards are typically used for short-term borrowing for everyday shopping such as groceries and petrol, or for larger purchases such as holidays or a television. A credit card can even be used to consolidate balances from other credit and store cards. You should check the costs as consolidating debt can be more expensive.

    Credit cards can help you manage your money by spreading the cost of any spending and providing a secure payment type.

    A credit card issuer will run a check on your credit file to see if you are eligible for their credit card. This is called a credit check . They will also decide how much you can afford to borrow. If you've previously had problems paying back your debts then your credit file may be adversely affected. If you think this might be the case you can contact a credit reference agency and ask to see your credit file.

    Like debit cards, you can use credit cards to buy goods in shops, over the phone and online. The process for making a payment will differ depending on how you do it:

    • In a shop you'll usually be asked to place your card in a chip reader and enter your PIN.
    • Online you'll need to enter your card details, confirm your address and in most cases verify yourself with a password.
    • Online or over the phone you should expect to be asked for your CVV code. This is a 3 digit code on the signature strip on the back of your card. For American Express® cards, this is the 4 digits printed on the front under the hologram.
    • You can use a credit card abroad to make purchases. Look out for the MasterCard®, American Express® or VISA logos depending on your card type. Most card issuers will charge you a fee to change your purchases from foreign currency back to sterling.
    • You can also use your card to withdraw cash at a cash machine, bank branch or buy foreign currency (normally called a cash advance). Most credit card issuers will charge you a fee for this and the interest rate for cash transactions is usually higher than the rate for purchases and is typically charged immediately - if you are not sure you should check your terms and conditions.

    What is the difference between a debit card and credit card?

    The key differences are:

    • When you use a debit card the money is debited from your bank account. With a credit card the money you've spent on purchases is normally held on interest free credit until you receive your monthly statement. You can then either pay off the bill in full and not pay any interest, or decide to pay off some of your balance in which case you would be charged interest.
    • Typically you'll be charged a fee for making a UK cash withdrawal at a cash machine using a credit card but it's generally fee-free if you use your debit card. If you withdraw cash using a credit card then interest is usually charged from the date of the transaction and the interest rate for cash withdrawals is usually higher than for purchases.
    • Credit cards offer additional protection that debit cards don't. See below:

    What protection do I receive when using my credit card?

    Credit cards are covered by Section 75 of the Consumer Credit Act 1974.

    Under the act, a credit card issuer and the retailer have joint responsibility for your purchase if there is a breach of contract or misrepresentation - for example, if the item is faulty or the company goes bust before you receive your goods. Plus, Section 75 can even give you protection for any costs that you incur as the result of the breach of contract by the retailer.

    Certain conditions have to be met for Section 75 to apply, for example, the purchase needs to be over £100 and under £30,000.

    What is a credit limit?

    The credit limit on your account is the maximum amount that you're allowed to borrow based on your financial circumstances. The limit is initially set when you apply for your card. It is assessed on a regular basis and can go up or down. Any alteration to your limit is unlikely to happen until after you have had your credit card for 6 months

    In what circumstances will my credit limit decrease?

    Your credit limit can be decreased for a number of reasons. These can include: missing payments, going over your credit limit, information received by the issuer from credit reference agencies, the way you've managed other accounts (e.g. current accounts).

    If you feel that your credit card limit is too high, then you can ask for it to be decreased at any time.

    What are the different types of credit cards available?

    Credit card features can differ from one provider to another, but generally they fall into one of the three following categories:

    • Rewards cards  - typically give you perks like Avios, vouchers, discounts or cashback. Generally the more you spend the more rewards you earn. They tend to be more suited to customers who spend every month.
    • Promotional rate cards  - offer a temporary low interest rate and can apply to balance transfers, purchases or both balance transfers and purchases. A promotional rate card may suit you if you're looking to consolidate your debts or take advantage of an interest free period but you should be prepared for your interest rate to increase when the promotional rate expires. Make sure you're aware of these rates before applying.
    • Low rate cards  - typically charge low interest on purchases and balance transfers and won't have an introductory offer. This type of card may be more appropriate for you if you don't have a balance to transfer and/or you are likely to carry a balance over a longer time period.

    Who can apply for a credit card?

    To apply for a credit card in the United Kingdom you must be over 18. Usually you'll need to live in the UK and have a UK bank account.


    What should I do before I apply?

    To make sure your application goes smoothly, it's good to be prepared:

    • Check that you're on the electoral roll. This will help confirm your identity. Not being on the electoral roll can delay your application as further proof of identity may be required.
    • Make sure that your accounts (e.g. loans, bank accounts, and mortgages) have up to date address details. If you've moved in the last three years you may also be asked for previous address details.
    • Have all your key personal details to hand. These can include your income, contact phone numbers and employment details.

    If you are unsure of whether you are on the electoral roll, you can check by visiting  www.electoralcommission.org.uk .

    How long does it take to apply?

    It can take as little as a week from applying to receive your card but a range of things can make the process longer, such as:

    applying by post instead of online, by phone or in a branch, if you've recently moved - this can make confirming your address take longer.

    If you need a credit card for a specific reason, such as a holiday, be sure to apply well in advance.

    What happens after I apply?

    One of three things:

    • Your application will be accepted and you will receive your credit card.
    • Your application will be referred for more checks. For example, if you have applied via post you might not have completed a section of your application or there might not be enough information on your credit file. The issuer may contact you to get the necessary information. Your application will then be accepted or declined.
    • Your application will be declined by the card issuer.

    Why are applications declined?

    There are a number of reasons:

    • It may simply be because you didn't meet the application criteria required. For instance, a credit card issuer may set a minimum income level. All issuers have their own criteria so while one might decline you, another might welcome you.
    • Adverse information in your credit history, most likely missed payments on mortgages, loans and credit cards or high levels of existing borrowing in relation to your income. Even if your finances are improving, your credit file may still be affected by something from up to six years ago.
    • The credit card issuer may have other information relating to your finances and ability to repay a credit card. For example, if you are applying for a card from your bank, they are likely to use information relating to your current account or savings.
    • Think carefully about which type of credit card will suit you and take care not to make too many credit card applications, as every time you apply for a credit card , whether your application is successful or not, it's noted on your credit file. This can make some credit card issuers wary about lending to you.

    What can I do if my application is declined?

    You'll be informed by the issuer of your declined application, you'll also be informed which credit reference agency was used. First of all you may want to find out why you were declined. The best way to do this will be by contacting the credit reference agency.

    Credit reference agencies share information about people who want to borrow with lenders - such as credit card issuers. The lenders use this information to calculate your credit score and decide whether to offer you a credit card. Your credit score is based on the information you provide and what's in your credit file.

    There are 3 main agencies in the UK:

    Get a copy of your credit file from the credit reference agencies by visiting their websites - there may be a small fee for this service.

    If you feel your information is incorrect or want to explain the background of specific pieces of information then contact the credit reference agencies. This is called a Notice of Correction and anyone searching your file in the future will see this and must take account of it.

    How do interest rates work?

    When borrowing money on a credit card you will most likely have to pay interest on the amount that you borrow. The issuer of the credit normally determines your interest rate based on information in your credit file. That interest rate will be applied to the amount you've borrowed.

    Typically interest rates are variable which means that they can be increased and decreased over a period of time. The reasons why interest rates may vary will depend on a number of factors, for example, how you manage your account, the cost of operating your account and also the current economic conditions.

    Interest rates also differ depending on how you use your card. It's common that there are different rates of interest for balance transfers, purchases, cash withdrawals as well as promotional offers.

    What is an APR?

    APR stands for the Annual Percentage Rate. You can use it to compare the cost of credit across different credit card issuers. It includes the interest rate charged and fees or charges you have to pay to access the credit e.g. annual fee. Some fees, like balance transfer fees for example, are not included in the APR. Before you sign an agreement all credit card issuers have to tell you what APR they will be charging.

    What is Representative APR?

    This is the rate most customers will eventually be offered by a credit card issuer. The APR which credit card issuers advertise may not always be the one that you're offered. Most issuers will have a range of APRs, often advertising the best rate.

    It's a good idea to check with your credit card issuer what APRs they offer before applying as you could be offered these rates instead of a better rate which you've seen advertised.

    How can promotional rates help me?

    Sometimes credit card providers offer promotional rates on balance transfers and purchases. These can include:

    • interest-free periods that go back to the standard rate once the period ends, low interest rate for the life of a balance.

    These promotional rates can save you money but look for what suits you. If you tend to pay off your balance every month then you may benefit from an interest-free period but if you want to pay your balance over an amount of time that goes beyond the end of the promotional period, you may find a low purchase rate more suitable.

    It's always best to check if there are any fees in relation to promotional rates, for example you may get charged a fee for transferring your balance from one card to another. You should take this into account when considering the right product for you.

    How will purchase rates affect me?

    This is what you'll be charged when you use your credit card to buy things. Typically you'll have up to 56 days (or around 20-30 days after your statement) to make your payment in full before you are charged interest. If you do not make your payment in full then interest is typically charged from the date the transaction is made until it's paid in full.

    Some cards offer introductory purchase rates which may be suitable if you are looking to spread the cost of large purchases over a short period. Usually, at the end of a promotional period the interest rate will go back to the standard rate.

    What is a balance transfer?

    balance transfer credit card allows you to transfer balances from other credit or store cards onto your credit card.

    Balance transfers can help consolidate your debts into one place and often promotional rates will be offered which help to reduce the cost in the short term. Normally you will be charged a fee for this type of transaction. After a promotional rate has finished the balance will normally go back to a higher standard rate.

    If you go over your limit or fail to make a payment on time your promotional offer could be withdrawn and a standard rate applied. Always check your terms and conditions for interest rates and fees before you undertake a balance transfer with your card issuer.

    The time it takes to transfer a balance from one credit/store card to another can vary depending on what method of payment is used by your card issuer. There may be fraud and/or risk checks which could prolong the process.

    What do I need to know about cash advances?

    This is when you use your card to make a cash withdrawal on your credit card. A cash withdrawal also includes any transactions that can be converted back into cash, such as:

    • buying foreign currency,
    • gambling transactions.

    Unlike purchases, interest on cash is normally charged daily from the date of the withdrawal, whether you pay off your balance in full or not. It is also common to be charged a fee for taking out cash on your credit card and the interest rate for cash withdrawals is usually higher than for purchases.

    What do I need to know about credit card statements?

    You should receive your statement each month after you begin using the card . If, for some reason you do not receive your statement, your credit card provider will still expect a payment.

    The statement will show:

    • how much you owe (outstanding balance),
    • your transactions made that month, e.g. purchases you've made in shops,
    • payments you've made to your credit card,
    • the minimum payment you're required to pay,
    • the date by which the payment needs to be made.

    A statement may also include:

    • a reminder of your terms and conditions,
    • other useful information contained in the summary box such as forthcoming changes to interest rates, charging methods and payment timescales,
    • if there are any amounts outstanding from a previous statement.

    If you have not made a payment (or less than your minimum payment) then you will receive a formal request for payment, normally through the post.

    What should I look out for in my statement?

    Check your statement against your receipts for items you didn't purchase, have no knowledge of or which have been debited incorrectly.

    You may not immediately recognise all the transactions on your statement because some places where you've used your card may appear under a different name. This can be the case with some shops which form part of a wider group of retailers, or simply the location of a head office. If you don't recognise a name, try doing an internet search to see if it is related to any places you've used your card in recently.

    If you still don't recognise the transaction call us on 03459 758 758  as soon as possible and we'll help.

    Making payments

    It's really important to make at least your minimum monthly payments on time - if you don't, you're likely to be charged a late payment fee and your ability to get credit in the future may be affected.

    How much do I need to pay each month?

    You need to make at least the minimum payment each month. Your statement will tell you what it is. If you only pay the minimum each month, your debt could take a long time to clear. That's because your minimum payment is calculated as a percentage of your balance - so it decreases as your balance decreases.

    If you only use your card for purchases and you pay your balance in full and on time each month, you will not pay any interest. However, if you have transferred balances and aren't in a promotional period, or have taken out cash, interest will be charged even if you pay your balance in full. You should also be aware that interest rates are variable and may change.

    When do I have to pay?

    We will give you a payment date on your monthly statement - this is the date by which they must receive your payment.

    When you make your payments, leave enough time to make sure the funds arrive before the payment date. The amount of time it takes for your payment to arrive will depend on the payment method you choose so if you're unsure you can check with your card issuer or banking provider.

    Some credit card issuers will allow you to alter the date when your payment is due so that it's charged to you at a convenient time in the month.

    How do I make a payment?

    You may be able to pay your credit card by:

    • Direct Debit - if you set up a Direct Debit you don't have to worry about missing a monthly payment,
    • Standing Order - remember that this will need to be for more than your minimum payment,
    • telephone banking,
    • bill payment from your online banking service,
    • going into a branch using your Bank Giro Credit slip (from the bottom of your statement) with payment either by cash, postal order or cheque.

    What Direct Debit options are avaliable to me?

    There are three Direct Debit options:

    Full payment -  this will collect the total balance shown in your monthly statement.

    Minimum payment -  this will collect the minimum payment shown on your monthly statement. Paying this way means you can avoid late fees but will usually mean you'll be charged interest on your outstanding balance. To help reduce interest charges you can make an extra payment on top of your Direct Debit.

    Regular monthly amount -  this allows you to choose an amount or percentage you want to pay each month. If this is less than the minimum payment most credit card issuers will automatically increase the payment to the minimum amount. Paying by Direct Debit is a timesaving and simple way to pay your monthly credit card bill. You don't have to worry about missing that monthly payment, provided you have the available funds in your current account, once a Direct Debit is set up on your account.

    If your Direct Debit payment is set up to collect the full amount each month most credit card issuers will not charge you interest on your purchases.

    What is a credit balance?

    If you have a credit balance, it means that you don't owe any money on your credit card account. In fact you are owed money. In most instances this can happen if you've had a refund on something.

    Managing your credit card debt and staying secure

    To stay on top of your credit card:

    • only borrow what you can repay - it's wise to keep some of your available credit for emergencies,
    • decide the amount you want to pay each month - try setting yourself a target of when you want to pay off your balance and then tailoring your payments accordingly,
    • know and stick to your credit card limit - contact your provider if you don't want this increased,
    • keep receipts for all your credit card transactions so you can check your statement is accurate,
    • be aware that different transactions attract different interest and charges

    What should I do if i'm struggling to make payments?

    Call us. We have trained advisors who will be able to offer you help and information on paying off your debt, and you may be able to negotiate an agreement which will reflect what you can afford.

    If you still need help, get in touch with Payplan or the Consumer Credit Counselling Service. These are free, independent money advisers who will contact the card issuer on your behalf to see whether they can consider reduced payments on your account. They may also be able to negotiate interest being suspended and stop any further charges being made on your account.

    Their addresses are:


    Kempton House
    Kempton Way
    Dysart Road
    NG31 7LE
    Free phone: 0800 280 2816  

    Consumer Credit Counselling Service
    Wade House
    Merrion Centre
    West Yorkshire
    LS2 8NG
    Free phone: 0800 138 1111  

    Security and Fraud

    Identity theft can happen when fraudsters get hold of your personal details and use them to either take your money or to apply for credit in your name.

    You can reduce the chances of this happening by taking a few steps to protect yourself:

    Destroy anything that contains personal information. These are things such as bills, receipts and letters.

    If you have open accounts that you don't use anymore then make sure that you close them.

    Be aware of the dangers of having your personal mail stolen, there is a greater risk of this happening if you live in shared accommodation.

    Is there anything I can do to prevent credit card fraud?

    You can greatly reduce the risk of credit card fraud by taking basic precautions:

    When you receive your credit card statements be sure to check them for any transactions that you do not recognise, if you do see unfamiliar transactions contact your credit issuer straight away.

    Make sure nobody else has access to your credit cards.

    Be sure not to keep your PIN written down, when you receive it memorise it then discard of it straight away.

    If you lose your credit card contact your issuer immediately so that they can cancel It. Cancelling the card will stop others using it if it has been stolen; your credit card provider will issue you a new one.

    To protect you, if we suspects there is fraudulent activity, such as identity theft, taking place on your credit card we will stop it from being used. This often happens when unknown foreign transactions appear on your account.

    To prevent your card being stopped on holiday or business abroad, it's a good idea to tell your credit card issuer where you will be travelling to and how long you'll be there.

    What should I do if I suspect I am a victim of fraud?

    If you suspect you're a victim of credit card fraud contact your credit card issuer straight away. They can investigate the use of your card and if necessary, prevent any further fraudulent activity by cancelling its usage.



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