Credit card tips for absolute beginners

Most credit cards have one main perk - usually a low rate, low fees or a rewards program - that make them better suited to certain spending and repayment habits.

These are great if you don’t think you’ll pay your full balance each month, or if you want to use your credit card to pay off a large purchase, because you’ll pay less interest than on other cards. Keep in mind that low rate cards usually come with an annual fee, so make sure you shop around to find one that fits your budget.

With no annual fee, you can use more of your funds to do what you want. These are good if you think you’ll pay off your balance each month, because they generally have a higher interest rate.

If you plan to use your credit card for your everyday spending, a rewards card could be great for you - it means you’ll earn points while you spend. Rewards cards usually have a higher interest rate, so it’s important to make sure you pay your balance each month. They also usually have a higher annual fee.

When you apply for a credit card, we’ll ask you what you’d like your credit limit to be. This is the most you can spend on your card without paying some off, so it’s important to choose a limit you’re comfortable with.

No matter what your limit is, you’ll want to avoid overspending and getting yourself into debt you can’t pay back. You don’t have to pay your full balance each month, but the more you pay off the less interest you’ll be charged.

It’s also good for you to get an idea of your monthly income and how much of it you can put towards your credit card payments – especially if you’re using it to pay off a big purchase.

The best way to avoid unnecessary fees and interest is to know when they apply. You can find a full list of charges in your credit card T&Cs, but here are some common ones to look out for.

The interest rate you see in ads is usually the purchase rate, which will be charged to any balance you don’t pay off by your payment due date. To avoid this, you’ll need to pay off your full balance each month. Most credit cards come with an interest free period that you could also use to your advantage.

If you withdraw money from your card (called a ‘cash advance’), you’ll be charged a cash advance rate and fee.

If you don’t pay at least the minimum monthly payment by your due date, you’ll be charged a late fee.

• How do credit cards work?
• Credit card glossary
• Get to know your finances