Finance glossary
Credit Card
Also known as: Visa credit card, Mastercard credit card
In simple terms
A credit card lets you borrow money up to a set limit to pay for things now and pay it back later. If you clear the balance in full each month, you usually pay no interest.
On this page
What does credit card mean?
A credit card is a way of borrowing. The provider gives you a credit limit, and you can spend up to it in shops, online or by contactless. Each month you get a statement showing what you owe and a minimum amount you must pay.
Unlike a debit card, you are spending the lender’s money, not your own. That borrowing is a regulated credit agreement under the Consumer Credit Act 1974, which brings valuable protections such as Section 75.
How a credit card works
If you pay your statement balance in full by the due date, purchases are normally interest-free — this is the interest-free period. If you pay less than the full amount, interest is charged on the remaining balance, usually calculated daily at the card’s APR.
You must pay at least the minimum each month. Paying only the minimum keeps the account in order but means the debt reduces very slowly and costs a lot in interest over time.
How could this affect me?
Used carefully — clearing the balance each month — a credit card is a flexible, well-protected way to pay, and it can help build a positive credit history. Section 75 also makes the provider jointly liable with the retailer on many purchases.
Used carelessly, it is easy to build up expensive debt. Interest rates are typically much higher than on a personal loan, and carrying a balance month to month can cost far more than the original purchase.
Things to watch out for
- Paying only the minimum each month makes the debt shrink very slowly and costs a lot in interest.
- Cash withdrawals on a credit card usually charge interest immediately, with no interest-free period.
- Introductory 0% deals end — check what the rate reverts to and any transfer fees.
- Missing payments can lead to charges, a higher rate and a mark on your credit file.
Know your rights
- Under Section 75 of the Consumer Credit Act 1974, the card provider is jointly liable with the retailer for breach of contract or misrepresentation on a single item costing over £100 and up to £30,000.
- The borrowing is a regulated credit agreement, so you are entitled to pre-contract information and normally a 14-day right to withdraw.
- You can also ask your provider to raise a chargeback under the card scheme rules where a purchase goes wrong.
- If a provider treats you unfairly, you can complain and escalate to the Financial Ombudsman Service.
General information, not personal advice
Consumer Credit is an independent information service. We do not provide regulated financial advice or sell financial products. For advice on your own situation, speak to an appropriately authorised firm or a free service such as MoneyHelper. About Consumer Credit.
Sources
We checked this page against these official and authoritative sources.
- legislation.gov.uk, Consumer Credit Act 1974 — section 75 (opens in a new tab). Accessed 22 Aug 2026.
- MoneyHelper, How credit cards work (opens in a new tab). Accessed 22 Aug 2026.