Credit cards can help people manage expenses, making aspirational purchases more achievable and day-to-day spending more convenient. They provide the flexibility that modern life demands, allowing users to make purchases instantly and settle payments later. This approach streamlines budgeting and enhances financial management, which explains why credit cards have become a preferred choice for many consumers.

However, it’s important to understand that credit cards are not a one-size-fits-all solution. If you struggle to pay bills on time, using a credit card could lead to high-interest charges and fees, worsening your financial situation.

When used responsibly, credit cards offer benefits such as building credit history, earning rewards, and providing a safety net in emergencies. This guide will help you understand credit cards and empower you to use them wisely and confidently.

What is a credit card?

A credit card is a payment card that allows cardholders to borrow funds up to a certain limit to pay for goods and services. Unlike debit cards, which deduct money directly from your bank account, credit cards provide a line of credit that you can use and pay back over time. Each card comes with terms like a credit limit, interest rate (APR), and repayment conditions.

How do credit cards work?

Understanding how credit cards work can help you make the most of it for managing your day-to-day finances. Here’s a step-by-step breakdown of the process, from application to repayment.

1. Application and approval

The journey with a credit card begins with an application. Whether you're applying online or in person at a bank, you'll need to provide personal information, employment details, and financial history. The issuer then reviews your credit score, income, and other factors to determine your creditworthiness. Based on this assessment, they decide whether to approve your application and determine your credit limit.

2. Making purchases

Once you have your credit card, you can use it to make purchases both online and in-store. When you swipe your card or enter your details online, the card issuer verifies that you have enough available credit and approves the transaction. The issuer then pays the merchant on your behalf, and the purchase amount is added to your credit card balance.

3. Billing cycle

Credit card activities are recorded in a monthly billing statement. This statement includes all your transactions, the total balance, the minimum payment due, and the payment due date. The billing cycle typically lasts about a month, and at the end of it, you’ll receive your statement.

4. Repayment

Your billing statement will show the total amount you owe, but you’re only required to pay the minimum payment by the due date to keep your account in good standing. However, paying only the minimum means carrying a balance to the next month, which incurs interest charges. To avoid interest, aim to pay off your full balance within the grace period. It's important to check the terms and conditions of your specific credit card agreement to understand the exact details of the grace period and any associated fees or charges.

5. Interest and fees

Interest is charged on any balance you carry over past the due date. The rate, known as the Annual Percentage Rate (APR), varies by card and your credit profile. Besides interest, other fees can apply, such as late payment fees, over-the-limit fees, and cash advance fees. Always read the terms and conditions of your card to understand these charges.

Find out more on Avant Money credit card interest and charges and the different credit cards on offer.

6. Managing your credit

Managing a credit card responsibly can positively impact your credit score. Here are some tips:

• Always pay your bills on time. Late payments can lead to fees and negatively affect your credit score.
• Whenever possible, pay your balance in full each month to avoid interest charges.

Is a credit card right for you?

Credit cards, when used wisely, offer significant benefits, including building credit history, earning rewards, and providing financial flexibility. However, they require disciplined management to avoid pitfalls such as high-interest charges and fees. Understanding the responsibilities that come with credit cards and managing them sensibly can help you leverage their advantages while maintaining financial health.

Avant Money credit cards come with a range of benefits which include:

• Money transfers: Transfer funds from your credit card to your bank account when you need it. Enjoy the freedom and flexibility to cover all your payment needs.
• Avantages loyalty programme: Avail of over 300 always-on offers and receive discounts from 100’s of your favourite top brands.
• 56 days of zero interest: By paying off your bill in full on time each month you can get up to 56 days interest-free credit when you make purchases on your Avant Money credit card.
• Digital Wallet: Add your Avant Money credit card to your phone with Google Pay and Apple Pay.
• My Avant Money: Manage your card from anywhere with your online Avant Money account.

For those looking to maximise these benefits, Avant Money offers credit cards options tailored to meet different needs and lifestyles. Explore our credit card offerings such as One Card and Reward+ to start enjoying the benefits of smart credit management today.

Avantcard DAC trading as Avant Money is regulated by the Central Bank of Ireland.