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Information » Money » Banks and Building Societies » Debit, credit and Store Cards

Direct Debit and Standing Orders

Debit Cards

  • Debit cards, like Solo, Electron, Maestro, Visa Debit and MasterCard Debit are used to debit your current account when you make a purchase. A debit is when money is taken out of your bank account
  • With a debit card, only money that you have available in your account can be debited. If you do not have enough funds to cover the cost, your card may be declined and the purchase refused. With some debit cards you might be able to pay for something even if you don’t have the money in your account - but you’ll go into debt and you’ll have to pay charges
  • Debit cards can be used for immediate payment for everything from clothes, books, meals, petrol, bills and internet purchases
  • They can also be used to withdraw cash from your account at cash machines or in branch
  • You can apply for a debit card at your local bank or building society if you are 16 or over
  • Debit cards now operate on a Chip and PIN. Instead of signing for your purchases when using a debit card, you must now enter a four digit PIN number issued to you by the bank. This is to give you greater security. Never tell anyone your PIN number. You will never be asked for this by your bank or building society
  • Some cards also use contactless payment. No signature or PIN entry is typically required for contactless purchases under £20, all you do is place your contactless card over the card reader to make the payment

Credit Cards

  • Credit cards allow you to make purchases and payments 'on credit'. A credit is a debt that you must repay
  • Credit cards are mainly used to spread the cost of purchases as the money you owe can be paid off in smaller amounts each month
  • You will be charged for using a credit card in the form of monthly interest charges and this can mean you pay more for your purchase
  • Credit cards give good protection against fraud
  • Credit cards provide extra protection if you have problems with the goods or services you have bought that cost between £100 and £30,000
  • If you don’t pay back the full amount there’s usually hefty interest on the money you’ve borrowed
  • They are a short-term borrowing solution. If you want to borrow money on a long-term basis, you might want to consider a loan. It will be cheaper. Shopping by credit card is not cheap
  • If you do decide to get a credit card, one of the most important things to look at what interest rate the card has, otherwise known as the Annual Percentage Rate (APR). This is how much you will be charged each month for borrowing on your card The lower the interest the rate on the card, the less you will be charged each month
  • Some credit card firms can have special introductory rates of zero per cent, which means you won't be charged for using it. But if you do apply for a card with a low rate, always read the small print and find out how much the interest grows to when the special offer runs out. Remember, once the introductory offer period has expired, interest at the normal rate will become payable
  • Don't be tempted to use credit cards at cash machines to withdraw money. You’ll be hit with expensive charges – up to 4% or more with some companies
  • Credit cards are available through banks, building societies, retailers, supermarkets and even universities
  • To get a credit card you must be over 18 years old and have passed the credit check run by the credit card firm. With some cards it is 21
  • Always read the small print before signing on the dotted line

Store Cards

  • Many stores now offer a store card, which is credit card that can only be used in their stores
  • They tend to have higher interest rate charges than other credit cards so check all the small print and the APR before signing up
  • Some store cards will offer incentives to join, including money off the first purchases you make on the card or exclusive offers
  • You will usually be asked in store if you would like to apply. If you do not want a store card, say no. Don't feel pressurised
  • Be careful not to confuse store cards with credit cards linked to shops. Tesco, Sainsbury’s, John Lewis, Marks & Spencer and Asda all offer a store-branded credit card which can be used anywhere and not just in the named shop
  • And store cards are not the same as reward cards or loyalty cards. Reward cards – like Nectar or Tesco Clubcard – allow you to collect points on your shopping which you can use later to get money off your bill or swap for goods and services
  • Always check what type of card you are applying for and read all the terms and conditions first
  • It is important to remember that everything you buy on credit card must be repaid. Try and keep control on your spending on credit cards as large debts can easily mount up and, with interest charges on top, it can be hard to stay on top of your finances
  • Regularly check your balance and keep up repayments
  • You must be at least 18 to get one. Like with any other credit card, you’ll also need to undergo a credit check

Other Cards

Prepaid Cards

  • A prepaid card works a bit like a gift card – you top it up with money, and you can only spend up to that amount
  • They’re often used by travellers to carry holiday money, and by anyone without a normal bank account – generally kids, teens and people with poor credit ratings
  • Prepaid cards are safer than cash, since you can cancel the card if it gets lost or stolen
  • But they’re not accepted everywhere, and you may pay fees for using them or for topping them up

Charge Cards

  • Charge cards work a lot like credit cards – you buy now and pay the money back on your monthly repayment date – but with a charge card you absolutely have to pay off the balance every month. You can’t run up a bill and pay it back later
  • Generally charge cards are only for people on high incomes or for business use. There are also a few basic charge cards, but they don’t have much advantage over credit cards
  • They often have no spending limit and come with extra perks
  • But if you don’t pay your bill the fees can be much higher than credit card interest – and your card may be cancelled

If you are worried about credit or store cards and debt, talk to your local Citizens Advice Bureau or your bank for more advice. Don't worry, there are ways to reduce your debt and people you can talk to confidentially.

You can contact the Money Advice Service on 0300 500 5000 (or 0300 500 5555 for Welsh) Mon - Fri 8am-8pm, Sat 9am-1pm. There’s also an online chat function on their site.

You can contact Meic for free via online chat, text (84001) or phone (080880 23456).

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