Credit card minimum payments
All credit cards have a minimum amount you must pay back each month.
This will be a percentage of the amount outstanding, usually between 1% and 3% each month. Usually there'll be a minimum amount of £5.
For example, if you owe £1000 on your card a minimum payment of 2% would mean paying back £20 per month.
If you only pay the minimum payment on a card, it will take a very long time to repay. Always try to pay more than the minimum amount if you can afford it.
The Money Advice Service have a useful calculator on their website which lets you check how long it would take to pay off a credit card debt.
Credit card arrears
If you don't pay the minimum payment every month, your account will go into arrears. Your creditor will contact you to demand the missing payments are made, and if you don't do this eventually the account will default and further action may be taken.
For more information on what action a credit card provider can take to collect a debt, see our what your creditors can do section.
Credit card limit
All credit cards have a maximum amount you can spend.
Some cards are aimed at people with a poor credit history and have a low limit of £200 or so. Often these cards have a high interest rate, but if you pay them back on time, they can be a good way to boost your credit rating by showing other creditors that you can be trusted. Other cards have a much higher limit which can go into the thousands. Whether you have a low or high credit limit, it's very easy to run up affordable debts which will take a long time to pay back.
Sometimes your card provider will offer to increase your credit limit, especially if you have a good history of payments. You should think very carefully before agreeing to an increase in your credit limit, and refuse the increase if you don't need it. Some people like a higher limit 'just in case', but there's always the temptation to keep spending and run up a debt you eventually can't afford to pay back.
Interest and charges on credit card debts
Interest on credit cards varies from less than 10% to 70% or more. The rate of interest you're charged will depend on your credit rating.
Some cards give you an interest-free period of up to 60 days on purchases. This means if you buy something and pay off the whole amount within this time you won't be charged any interest.
But some card providers charge interest on purchases straight away, and most will charge interest straight away on money you withdraw from a cash machine.
If you miss payments, you'll get late payment charges on top of the interest. These should be no more than £12 for each missed payment.
Protection when you spend on a credit card
One important benefit of using a credit card is that you get extra cover on larger purchases.
If you use a credit card to pay for something worth between £100 and £30,000, the credit card provider is also responsible for the goods or services provided.
For example, if you paid for a holiday with a credit card but the company went bust, you could claim the money back from the credit card provider. Or if you ordered some items online but they didn't arrive, you could claim the money back from the credit card provider if the seller refuses to refund you.
This cover applies even if you only paid part of the amount with your card.
Joint credit card debt
The law only allows a credit card account to be in one name, so there's no such thing as a joint credit card. But your credit card provider may let you have a second credit card for your partner or someone else to use.
If your card provider has given you a second card, you will be liable for all of the money spent on both cards.
The second card holder is not liable for any of the debt, even the money spent on the card with their name on it.
For this reason, we recommend you think very carefully before asking for a second card.
PPI on credit card debt
In the past, many credit cards were issued with payment protection insurance (PPI) to cover the minimum payments if you became ill or lost your job.
Many of these PPI policies were sold to people who didn't need them or couldn't claim on them. If you think you were mis-sold PPI, you can ask the credit card provider to refund the payments to you. This could reduce your credit card debt, or give you a windfall to help clear other debts.
If you want to try getting PPI refunded, don't pay a claims management company. You can reclaim mis-sold PPI for free in a few easy steps.