Credit card limits
Some cards are available for people with a bad 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 on credit cards
Interest on credit cards varies from less than 10% to 70% or more. The rate of interest you're charged will usually depend on the card you have, which is often determined by 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.
Credit card balance transfers
Some credit cards let you transfer the balance from another card. Transferring a debt from a card with a high rate of interest to one with low or 0% interest could help you pay off the debt faster.
But low or 0% interest credit cards are harder to get if you don’t have a good credit rating. This means you can’t rely on balance transfers as a way of dealing with your credit card debts.
Also look out for fees when transferring a balance. Most credit card providers charge 2-3% of the amount you’re transferring as a one-off fee. If you’re transferring a balance to take advantage of a lower interest rate, the fees may mean you save less than you expect.
If you do transfer a balance, make sure you cut up the old credit card and close the account. Otherwise, you may be tempted to keep spending on both cards and you’ll end up with two debts.