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First we have to define a credit card. It is a financial agreement between you, the customer, and a finance company that will lend you money to pay for goods or get cash when you need them. For this service you pay interest on your purchases and have an obligation to the credit card company to repay the amount borrowed plus the interest in whole or part every month. There is a minimum amount you have to repay as a percentage of your balance. Credit cards are different from loans in that you can borrow what you like up to an agreed limit and make purchases at any time. Your balance may increase or decrease from month to month, and may be paid off in full.

A loan is a set amount you borrow to be repaid over a period of time along with interest at an agreed rate. The capital borrowed does not change and your balance will decrease month by month.

Credit cards get a bad press because they can be misused and cause a great deal of debt and hardship. However, used wisely they are a financial tool that can save you money.

You must be eighteen to apply for a credit card, and meet the criteria stipulated by the credit card company. This varies according to the type of credit card you choose and the company that provides it. All credit card companies are regulated by the FSA.
Choose your credit card wisely. Compare the best on the market to find the

one that suits your needs. Web sites such as which-credit-card-4u.co.uk or

finance.yahoo.com will give you the latest offers and interest rates. Many have

special deals for new customers. Look at the APR. This is the effective annual

rate you will pay on the money you borrow, but do remember that if you do

not pay it all off every month the interest you pay off each month will be less

than calculated, and the balance will be added to the money you borrow.

You should also look at the limit they set for you. This will depend on your credit rating and most cards start low and will increase the amount after you have made a few payments. Some cards offer a high limit at the outset but have restrictions.

Make sure the credit card company does not charge an annual fee. Most do not these days, with the exception of business accounts.

There are also cards for people with a low credit rating, and some companies offer a prepaid card, which you can top up when you have some spare cash. You pay a fee to purchase a card, and you do not need to have a bank account to own one.

You can apply for most cards online without the need to complete lots

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