Credit cards are essentially little pieces of plastic that allow you to borrow money from your bank for a certain amount of time. You must be 18 to use a credit card, as well as a store or affinity card, as is the case for all sorts of credit systems.

Credit cards are ideal for shoppers who know how to budget effectively, only want to lend funds for a short amount of time and have the sufficient income to handle the payments promptly and sensibly. Credit cards are a handy way to not have to carry cash around with you, especially if you plan on going a large spending spree. Completing transactions is also easier as you simply swipe and sign for it.

Wait a minute… what's the catch?

Well, the 'catch' is that you have to pay to borrow the money. Banks' APR (Annual Percentage Rates) are usually quite high and if you don't fully pay off the balance that you owe, you're likely to face a lot of expensive charges and interest rates that can quickly add up to a lot of debt if you're not careful. You usually have to pay off a minimum amount of the outstanding balance per month and interest is charged for any money not paid off by the end of the payment period. If you miss the payment date, you will also pay interest. 

Sounds expensive! How can I stay sensible?

Well that all depends on how much income you have! A spending limit can be placed on credit cards, preventing you from blowing too much money in one sitting. Future transactions after this boundary will be blocked by the bank until the current period ends. The limit can be changed and removed at any time if you happen to increase your monetary income! Credit cards are handy for paying for an expensive item (games console, television, mobile phone) in parts over a longer amount of time, though sometimes it's easier to simply pay it off in one lump sum. High interest rates and a long repayment period could end up costing you a lot more in the long run.

What else can I do with a credit card?

You're also able to withdraw money from a cash machine if you need to, but there are often additional charges for doing so. The bank will charge you interest from the day you withdrew the amount, plus there may be further transaction fees. It is recommended that you only do this in the case of an emergency as the convenience just isn't worth the extra fees. 

You can also use credit cards abroad if you happen to take it on holiday, which allows you to pay for things directly using the card or withdraw foreign currency from a cash machine. Again, this incites additional fees for using the card in another country (as does using any type of bank card). 

Some card issuers also offer other handy add-ons such as purchase protection and payment protection. Purchase protection offers temporary insurance against accidental damage or theft for items you've bought with the card, which is usually free. Payment protection, which costs a little extra, pays back any outstanding balance for you in the case of an unforeseen circumstance, such as redundancy or accident/illness preventing you from earning a wage. 

How do I decide what card I want?

Shop around! All banks and building societies offer competitive rates and ever-changing rates so it's best to investigate as many offers as you can. Be wary of details such as interest rates, annual percentage rates (APR), annual fees and introductory offers. Some banks charge a yearly fee for lending you the money, which is usually no more than £10 or £15. Be careful you don't get easily drawn in by introductory deals and schemes as they can often be deceiving. Accounts that waive interest fees for the first couple of months are very likely to apply higher charges once this period expires. 

Should I get one then?

It's entirely your decision. If you know that you can handle money responsibly, know how to budget effectively and won't skimp on your payments, a credit card can be a highly effective money source. However, if you're a bit silly with your spending, often forget deadlines and tend to blow your income as soon as you get it, it may be worth waiting until you're a bit more conservative with cash!