How credit cards work

Build your knowledge and confidence on choosing and using a credit card.


What exactly is a credit card?

In simple terms, a credit card offers you a flexible way to borrow money to make payments, which you then repay to your credit provider later.

You can choose to pay off your statement balance in full each month, or spread payments over a longer period. Just bear in mind, interest may be charged if you borrow over a number of months, unless an introductory or promotional rate applies. Fees may also apply to some credit card transactions.



What's a credit card useful for?

  • Manage larger purchases
    A credit card could help you to spread larger expenses, such as home improvements, a new TV or car repairs – giving you the option to repay over a number of months.

  • Manage unexpected costs
    If your car breaks down, or you need to make emergency repairs at home, a credit card could help you to manage the immediate costs and spread your repayments.
  • Protection on purchases
    Most credit card purchases of over £100 and up to £30,000 are covered by Section 75 of the Consumer Credit Act, which may be reassuring if anything goes wrong.


  • Consolidating other balances
    If you’ve got balances with other credit and selected store card providers, you could transfer them to organise your finances and potentially take advantage of lower interest rates.

Credit card transaction types

Card purchases

  • Pay for goods or services with your credit card, in store or online, including contactless.
  • Spread larger expenses, such as a holiday or home improvements.
  • Using a single card could help you to track and manage your everyday spending.

Read about everyday spending cards

Read about large purchase cards

Balance transfers

  • Move balances from other credit and selected store card providers, making things easier to manage.
  • With everything in one place, you’ll have fewer statements and payments to keep track of.
  • Transferring higher interest balances could reduce the overall cost of borrowing.
  • Transfer fees may apply.

More about balance transfers

Money transfers

  • The flexibility to move money from your credit card account to your UK current account.
  • Handy for cash only purchases or to manage unexpected bills.
  • Transfer fees may apply. Not all credit providers offer this service, and it may not be immediately available to new customers.

More about money transfers

Cash transactions

  • The option to withdraw cash, buy foreign currency or another cash equivalent with your credit card.
  • Often the most expensive way to borrow, but it could be helpful when you really need cash.
  • Fees and interest may apply.

Read about fees and interest

Credit card fees and charges

  • Interest is charged as a percentage of the money you borrow. The rate can vary based on the transaction type and whether a promotional or introductory interest rate applies.
  • Fees may apply to some transaction types. For some accounts an annual fee also applies.
  • If you pay late or miss a payment, you may have to pay fees, lose any promotional offers you have, and it could damage your credit score.
Read about fees and interest Read about fees and interest

Credit card statements

While there’s a balance on your credit card account, you’ll receive a statement each month, providing useful information about your account, including:

  • Your balance on the date the statement was produced.
  • A list of transactions since your previous statement.
  • Your minimum payment amount and the date it’s due.
  • A breakdown of your balance and the interest rates which apply, including expiry dates for any introductory or promotional interest rates.

Making credit card payments

Your latest statement details the minimum payment you need to make, along with the due date.

If you can’t pay the whole statement balance, it’s a good idea to pay as much as possible to keep any interest costs down.

Ways to pay your credit card

Credit cards and your credit score

Credit reference agencies securely hold information about you and your financial past, using this to issue your credit score. Lenders can access this information to support their decisions around offering credit.

The way you manage your borrowing is important. For example, if you don’t make payments on time or go over your credit limit, in addition to fees, charges and the possibility of losing any promotional interest rates, your credit score could also be affected.

Frequently asked credit card questions

  • A debit card is linked to your current account. When you use it, money is taken from your account balance.

    A credit card is a separate account. When you use it, you borrow money you’ll need to pay back later.

    There are more complex differences though, including the costs for using one or the other.

  • 1. What do you need a credit card for?

    Most credit cards are created with a specific use in mind, although some offer a range of benefits.

    2. Consider your options

    • Does this option suit my borrowing needs, or should I consider other alternatives?
    • Will I be able to make repayments, even if my circumstances change?

    3. Compare card features carefully

    As well as looking at any introductory interest rates, look at differences in account fees and charges.
    Many credit card issuers provide an eligibility check tool, helping you to narrow down your search to credit cards you are eligible to apply for. The Bank of Scotland version is called One Check

    Choosing a credit card

  • The maximum amount you can borrow is also known as your credit limit. This is set based on an assessment of your personal circumstances when you open your account, but it can also change over time if you’re offered a different limit, or you request one.

    You’ll find your current credit limit on your latest statement, or you can check it online using Internet Banking.

    Find out more about your credit limit

  • You can use a credit card in most countries outside of the UK.

    Just bear in mind that fees may apply when you make transactions abroad, so it’s a good idea to check your account terms and conditions before you travel.

    Using a credit card abroad

  • Most credit card purchases of over £100 and up to £30,000 are covered by Section 75 of the Consumer Credit Act 1974, which means you could claim a refund if something you’ve paid for is faulty, doesn’t arrive or isn’t as described.