Credit cards Credit card FAQs

What does credit card APR mean?

Credit cards in a wallet

1 in 4 people have a credit card they haven't used in the last year

The APR – annual percentage rate – is a standard way to calculate the cost of credit that takes account of the interest rate and other charges charged by a credit card company. In theory, credit cards with lower APRs should be cheaper, but this isn't always true. A lower APR doesn't always mean a particular credit card is the best credit card for you.

In practice, there are problems with APRs on credit cards. For example, they don't take account of the many different ways that credit cards calculate interest, and assumptions have to be made to take account of annual charges.

These different ways of charging interest mean that two credit cards with the same APR can charge very different amounts of interest. See our guide to how credit card interest is calculated for more detail.

What's 'Section 75' protection on credit cards?

Section 75 of the Consumer Credit Act 1974 makes your credit card issuer jointly liable with whoever you're paying if something goes wrong. It applies when you use your credit card to pay for something costing between £100 and £30,000. Section 75 applies even if you use your credit card to buy items abroad or if you shop online using your credit card.

This can be useful if you have a problem with an item you bought and you can't get the retailer to resolve it, or you paid in advance for a product or service you didn't receive – because the company's gone bust, for example.

You can claim the full value of a purchase from your credit card company, not just the amount you paid on your credit card i.e. if you paid a deposit.

In the past credit card companies have questioned whether Section 75 applies to purchases made overseas. In order to clear up the confusion The Office of Fair Trading (OFT) went to the High Court to clear up the matter.

It lost its case, but won an appeal in 2006. This means that foreign transactions on your credit card are covered in the same way as UK ones.

For out more: See the Which? guide to the Consumer Credit Act or to find specific answers to a range of credit card problems use our Which? Consumer Rights search engine.

What's the difference between the purchase, balance transfer, and cash withdrawal rates on credit cards?

Unless you pay off the balance on your credit card in full each month, you're charged interest on the value of purchases made with the credit card. The rate of interest you pay is the 'purchase rate'. 

You can also use your credit card to withdraw money from cash machines. Normally a higher rate of interest (the credit card 'cash withdrawal rate') is charged, and you'll usually be charged interest from the day you make the cash withdrawal even if you pay off the credit card balance in full.

Most credit cards offer a reduced introductory rate (the credit card 'transfer rate') for a debt transferred to the credit card from elsewhere. This rate usually applies only to the transferred balances, although some credit cards give reduced rates for new purchases as well.

For out more: To find the best 0% deals on the market go to best 0% balance transfer and best 0% purchases credit card deals. 

I was on a special credit card deal with a rate of 0% on balance transfers. Why was I charged interest when I bought some petrol on my credit card, even though I paid the money back straight away?

Credit card companies tempt people to transfer balances by offering low (or 0%) introductory rates for the first few months. But these credit cards normally have higher rates for new purchases and cash withdrawals.

Any payments you make to your credit card company usually reduce balances being charged at the lowest interest rate first. You don't pay off any of your credit card spending being charged at the higher rates until you've cleared the whole transferred balance.

One way to avoid this trap is to transfer your existing debt to the best credit card with a low introductory rate and to use a different credit card that has a low rate for new purchases.

For out more: To find the best credit card for your needs, check the Which? best credit card deals.

An alternative is to choose a credit card that allocates payments to the most expensive debt first - the best credit cards for an order of repayments in the consumer's favour are issued by Nationwide.

Does it matter the way my credit card interest rate is calculated?

Different credit card issuers use very different ways to calculate interest. So, if you've got two credit cards with the same interest rate, you could end up paying significantly more interest with one credit card than the other. The reason is that credit card providers start and stop charging interest on transactions at different times. This makes understanding your credit card charges something of a black art. 

For out more: See our guide to how credit card interest is calculate.

I applied for a credit card and asked for a maximum credit limit of £600. Why was I given a credit card with a credit limit of £2,000?

Credit card limits are set by the credit card company, and depend on how they credit score your application. If you pass the credit score, they will tend to give you the maximum credit limit they're prepared to lend, rather than what you ask for. If you think the credit limit on your credit card is too high, ask your credit card issuer to reduce it.

I was charged a late payment fee on my credit card. Is this normal for all credit cards?

Credit card companies charge if you're late paying your bill or exceed your credit limit.

In July 2006 most credit card companies were forced to cut these charges from £20 or £25 to around £12 by the Office of Fair Trading.

If paying your credit card bill late is unusual for you or not your fault (for example, because your statement arrived late), some credit card providers will waive the charge if you ask them. If you want to ensure that you avoid late payment fees, set up a Direct Debit to settle your credit card bill in full or to make at least the minimum payment on your credit card.

For out more: See the Which? guide to the Consumer Credit Act or to find specific answers to a range of credit card problems use our Which? Consumer Rights search engine.

Do I need credit card protection insurance?

Credit card protection insurance provides cover against fraudulent use of your credit cards if they are lost or stolen. It sounds appealing, but is of little use because, under the Consumer Credit Act 1974, the most you'll ever be liable for on your credit card is the first £50. You're not liable for any misuse once you've reported the credit card lost or stolen. And in many situations you are not even liable for the first £50 (and many credit card providers waive this charge anyway).

For out more: See the Which? guide to the Consumer Credit Act or to find specific answers to a range of credit card problems use our Which? Consumer Rights search engine.

Is it safe to use my credit card to do online shopping?

A credit card on keyboard

Shopping online: find out more about your rights

Using your credit card to buy over the internet (or by phone or post) is as safe as using your credit card in person. In general, if your credit card is used fraudulently, the most you can be held liable for is £50. But under the 'distance selling regulations', if anyone dishonestly or fraudulently uses your credit card or debit card to buy from a supplier anywhere in the European Union by phone, fax, internet, digital TV or mail order, you can cancel the payment and get a full refund from the credit card issuer. (In other words, you are not liable even for the first £50.)

Even though you are protected, you should still be careful whenever you use your credit card and use your common sense about who you give your credit card details to.

For out more: see the Which? guide to shop-safely online. Also check out the Which? guide to the Consumer Credit Act or to find specific answers to a range of credit card problems use our Which? Consumer Rights search engine.

What is credit card risk-based pricing?

It's increasingly common for banks and credit card companies to use a customer's credit history to set interest rates on their credit card. This means that those with a poor credit history are generally offered a higher interest rate when they apply for a credit card.

In principle, risk-based pricing is a fair way for those with good credit histories to get cheaper credit card interest rates, but how banks decide their rates isn't clear so it's hard to compare.

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