Credit cards are a convenient and flexible way to pay for things without having to carry cash. And if you use them wisely, credit cards can be one of the cheapest sources of credit available.
With a credit card, the money you spend is a loan from your credit card provider. Your credit card provider sets the maximum limit you can spend on your card (listed on your statement), which you can spend either straight away or gradually over a period of time. Under the Central Bank’s Consumer Protection Code your credit card company cannot increase the limit on your card without your permission.
Each month, your credit card provider will send you a statement that shows:
How much you spent since the last statement
Any cash you withdrew using your card
Any interest due
The total balance – this is the amount you owe
The minimum payment that must be made by a set date, called the due date. The minimum payment is usually around 2% to 5% of the total amount you owe. But you should try to pay off all or as much as you can of your monthly balance. If you only pay off the minimum balance on your credit card each month, it will cost you a lot in interest and could take several years for you to pay off a large balance.
Think about setting up a direct debit to pay your credit card bill every month before the due date. This helps you to avoid late payment fees and also helps you to keep your credit card debt under control. You can set up a direct debit for a certain percentage of the bill, or a certain amount every month so that you are not tempted to only pay the minimum balance.
If you are worried about credit card debt, check out our information.
29 May 2023
Borrowing
What are the consequences of equity release loans?
Should I get a loan for my wedding?
Can I save money by switching credit card?
If I miss a loan payment will it affect my ability to borrow?
How do I find the lowest interest rate on loans?
If you’re thinking of taking out a loan but unsure where to start, check out our loan comparison Money Tool to compare providers, find out the monthly repayments and calculate the total cost of credit. If your wedding is coming up and you’re weighing up whether or not to get a loan for it, you should read our getting married tips to help guide you.
One of our guests at the Money Clinic wanted to know the consequences of releasing equity in his home. If you want to know if this is an option for you, read more about equity release.
The amount of interest you are charged depends on the APR on your card and how you use your card. Interest rates on credit cards can range from 13% to 26%, sometimes well above that charged on overdrafts and personal loans. Use our credit card Money Tool to check current rates of the main providers.
If you pay your bill in full before the duedate you will not be charged any interest. This is called the ‘interest-free period’. This varies from one credit card provider to another, but is generally about 56 days. Be aware, however, that most credit card providers don’t offer an interest-free period for cash withdrawals so you will be charged interest from the date you withdraw the cash.
If you only pay off the minimum repayment it will mean you will pay more in interest and it will be harder to reduce what you owe on your card – unless you start to make larger regular payments to reduce it.
If you pay off part of the bill, you will very likely be charged interest on all your purchases from the day you bought them. For example, if your statement shows you owe €1,000 and you pay off €900 by the due date, most providers will charge you interest on the full €1,000 until the date your payment reaches your credit card account. After that date, you will be charged interest on the €100 that remains unpaid and on any new purchases you make. You should check with your provider first to see how interest is charged and read your terms and conditions very carefully.
If you use your card for purchasing and withdrawals, you can see from our credit card Money Tool, providers usually charge different rates depending on whether you use your card for purchases or cash withdrawals. If you are in the habit of using your card for both and/or carry over outstanding balances regularly, then check the terms and conditions of your agreement with your provider so you can work out how you are charged. You may get a better deal elsewhere, so if you are not happy, see if your provider is willing to negotiate a better rate with you or else consider switching.
Other fees and charges (including Government stamp duty)
As well as interest, you may have to pay other charges for using your credit card. You can use our credit card Money Tool to compare charges with different providers. Some of these fees may include:
Over credit-limit fee
You are charged this each time you have gone over the agreed credit limit, and your provider may refuse further transactions on your card.
Cash advance fee
This is a transaction fee charged each time you make a cash withdrawal. Some providers charge this fee even if you have already paid enough cash into your account to cover the withdrawal amount.
Foreign exchange fee
This is a fee for every purchase and cash withdrawal in a currency other than euro.
Late payment fee
You pay this if you do not pay at least the minimum repayment by the bill due date.
Unpaid item fee
You pay this if your payment is returned unpaid. For example, if a direct debit is not paid or a cheque bounces.
Replacement cards andPIN
You may have to pay a fee to replace your cards and PIN if your card is lost or stolen or if you forget your PIN.
Government stamp duty
You have to pay an annual tax, which is usually deducted from your credit card account on 1 January for each account held at any time in the previous year. You pay stamp duty for each credit card account you have during the previous year. Check the Revenue website for information on the amount of tax you must pay.Get information on how stamp duty is collected if you are transferring your credit card balance or closing your account.
Additional authorised users
You may decide to ask your bank or card issuer for an additional card to be sent to a person named by you, such as your spouse or partner. By giving an additional card to someone else, you give them permission to spend money on your card, up to its credit limit, and you will be liable for any debts they run up.
Stamp duty is charged on the credit card account and not the number of cards, so no matter how many cards are operating on the account there is only one amount of stamp duty chargeable per year.
Switching your credit card
Credit card providers may offer new customers a low interest rate (or no interest) for a set time if they transfer their balance to a new card. You can use our credit card Money Tool to see what rates are currently on offer but make sure to check:
How long the low rate will apply and whether you think you can pay back what you owe before the rate increases
Whether the reduced rate applies only to the transferred balance or also to new purchases and cash withdrawals during the offer period
What the rate will be after the introductory offer ends
If you are switching credit card, make sure you close your old credit card account so that you are not tempted to spend money using both cards. Remember that you have to pay stamp duty before you close your old credit card account. Ask your old credit card issuer for a Letter of Closure, which proves that you paid the stamp duty for that year. Give this letter to your new credit card issuer as soon as possible so they do not charge you stamp duty again.
Remember, if you don’t close your old credit card, then you will be charged stamp duty twice.
