What is a credit card?

A credit card is a card issued by a bank or other finance company whose holder is able to access credit without seeking prior approval. There will be a limit on the amount of debt an individual can run up and interest charged on un-cleared borrowings.

Where have you heard about credit cards?

Practically everywhere. Advertising, including direct mail-shots to households and promotional literature in bank branches, seeks to drum up new business. A distinct strand of marketing seeks to persuade rivals' customers to switch cards. Media commentators routinely highlight warnings about a 'credit bubble' building up in the economy.

What you need to know about credit cards.

A credit card gives access to a set amount of borrowing from a bank or finance company. It allows individuals to make their own credit decisions, usually at the point of sale, within that pre-set limit. Most cards charge no interest provided all debts are cleared each month. If they are not, interest charges are usually considerably higher than would be levied on an overdraft or personal loan.

There are also secured credit cards available for people with a limited or poor credit history. The credit account is linked to, and supported by, a savings account.

Some cards offer incentives such as reward points, while 'affinity cards' are branded with the name of a charity or other organisation and sometimes donate a portion of the money spent to the organisation concerned.

Find out more about credit cards.

To learn more about credit cards and their importance to consumers, see our definition of debt.