Types of Credit card
Credit cards can be extremely useful, but some types can also let you run up large debts and interest charges if they are not used wisely.
There are many types of Credit card and they all have different functions:
Cheque guarantee cards
Most shops will only accept a current account cheque if you have one of these cards.
Cash cards
This lets you get cash from cash machines by using a PIN (personal identity number). Your PIN should be kept secret; if you lose it or it is stolen, inform your bank immediately. If someone else withdraws cash with your card and PIN before you report it, you may have to pay for any amount that they took out.
Keeping your card separate from your PIN reduces the risk of someone else being able to use it. Many cash cards will work in lots of different machines, so you don't have to use the machines for your bank. Your bank will be able tell you which cash machines you can use.
Debit cards (e.g. switch)
This card allows you to buy things without writing a cheque or carrying cash. You can also use it to buy things over the telephone or on the internet. It's just like using an "electronic cheque". When you use it, the amount of your purchase is "debited to" (taken from) your account, usually two or three days later. Your bank statement will often show which supplier you bought the goods from.
Some companies, such as supermarkets, will let you have cash from the till, known as "cash-back", as well as pay for goods.
Combined card
You can avoid having to carry several cards with this: it is a cheque guarantee, cash and debit card all in one.
Credit cards (e.g. visa and mastercard)
Like a debit card, a credit card allows you to buy goods and services from a huge range of shops and other suppliers, including over the telephone or on the internet.
The difference between a credit card and a debit card is that a credit card lets you pay for things now, but you don't get the bill until later.
The firm issuing you with the credit card is lending you money to buy things. They may charge a yearly fee for the card. When you open your credit card account, you will be told of your “limit” (how much you can borrow). If you go over this limit, your card may be taken away from you.
Each month your credit card company will send you a statement, showing what you have spent using the card. It will also tell you how much you owe them and by what date you need to make a payment.
You have the choice of paying the bill in full, or paying part only. If you pay off only part of the outstanding balance, interest is usually charged on the whole balance, before deducting the payment.
Not paying off the full amount of your credit card is a very expensive way of borrowing. If you can, you should try to pay the whole of the bill each month - or at least as much as you can afford.
Can cards be used abroad?
Debit and credit cards can usually be used abroad as a more convenient and low-cost alternative to foreign cash and travellers cheques.
How secure is my card?
Every transaction made with a credit card can be traced. This means that it's often easy to prove if a payment was made by someone else without your knowledge.
The company who issued the card will pay back any money that was stolen in this way, provided you let them know of the problem as soon as you discover it.
What if I lose my card?
If you lose a card or your cheque book, immediately notify the bank, building society or other organisation which issued it to you.
They can often be contacted 24 hours a day. Keeping your cheque book and guarantee card separate makes it harder for someone else to use them.
