Credit cards can act as a financial security net, but do you know everything that a credit card entails? Here we answer the most frequently asked questions about credit cards, so that you can get a better understanding of how they work.
In theory, getting a credit card may seem like a great option. However, it’s important to keep in mind that they’re not suited to everyone.
When determining if a credit card is the right option for you, there are many factors to take into consideration, such as fees, interest rates, and application criteria.
In a bid to aid you in making a fully informed decision, we’ve written this guide that answers the most common questions we get asked about credit cards.
1. What is a credit card?
A credit card allows you to take a loan from your credit card provider up to a certain limit which you can request. However, while your provider will take this into account, they will ultimately decide your limit.
A credit card is different to a debit card, which takes money directly from your current account.
A credit card loan can be spent immediately or gradually, and under the Consumer Protection Code, if you reach your limit it cannot be increased by your bank without your permission.
Your credit card limit will be stated on your monthly bank statement, and will include:
- Any interest due
- Total balance owed
- The cash you withdrew
- The minimum payment to be made by a set date
- How much you have spent since your last statement
If you pay off the minimum balance each month (2-5% of the total owed), your interest will be high and large debts could take years to pay off.
2. What is the difference between a credit card and a prepaid credit card?
The money that you spend with your credit card is always a loan from your provider that must be repaid.
A prepaid credit card, however, is your own money and allows you to top up by cash or directly from your bank account.
The biggest difference between a credit card and a prepaid credit card is that you can never get into debt with a prepaid credit card, as it’s your own money.
3. What credit cards are used in Ireland?
MasterCard and Visa are the primary credit cards used in Ireland, however, the likes of business, travel, and rewards cards may also be accepted in some places.
The chip and pin system is the most common method of payment alongside contactless, up to a maximum of €50, however, swipe cards may also be accepted.
If you're visiting Ireland for a holiday make sure to notify your bank as they may freeze your credit card due to suspicious withdrawals in a foreign country.
4. Who provides credit cards in Ireland?
You can apply for a credit card from the following providers:
Each provider will have its own interest rates attached.
5. Is it worth getting a credit card?
Credit cards can give you peace of mind knowing that you’ll never be stuck for money, however, there are some considerations to take before you apply, such as:
- Do you have other loans to pay off?
- Can you clear the balance each month?
- Do you have a reason for getting a credit card?
- Do you know what your credit card limit will be?
- Are you aware of the interest you’ll be charged?
If you can live without a credit card, then consider staying with a debit card or relying on your savings in order to avoid financial risks.
6. What are the credit card rules?
As previously mentioned, there are risks associated with credit cards, so if you decide to get one, follow these rules:
Pay off your balance each month and on time
This is the best way to avoid credit card debt. If you can’t afford to pay in full, then ensure that you can pay the minimum balance that we discussed in point number one.
The more you can pay off the better, as you’ll pay less interest as a result.
Never miss repayments
If you miss your repayments, it will make getting a future loan of any kind very difficult.
When you apply for a loan over €2,000, the lender is legally obliged to use the Central Credit Register (CCR) to check your credit history.
If they see missed payments, they will assume that you cannot effectively manage your finances, and may deny your loan application.
To avoid this, if you can’t repay a purchase that you’re planning to make, don’t make the purchase.
Stay below your credit card limit
If you come too close to your limit each month, this is another indicator to lenders that you cannot effectively manage your spending.
It is recommended that you limit your purchase to around 30% of your credit card limit each month.
Track your spending
If you monitor your spending, it will allow you to more easily see where significant chunks of your payments are being made, and to adjust your finances accordingly.
Review your statements
Mistakes can happen, so if you see something that’s not right, contact your bank to have it looked into.
This may also be a sign of fraud, which is all the more reason to pay attention.
7. What credit card fees can I expect to pay?
Credit cards do have fees that you must pay, including:
- Typical APR (Annual Percentage Rate)
- An annual €30 Government stamp duty fee
Other, non-compulsory fees that a provider may charge include:
- Exchange rate charges
- Interest rates on purchases
- An annual fee for the account
- Interest rates on balance transfers
8. Can I avoid paying interest on my credit card?
Most providers give up to 56 days of interest-free credit on purchases.
This means you can avoid paying interest if you pay off your balance in full and on time each month.
9. What happens if I don’t pay my credit card bill in full?
If you don’t pay off your balance in full every month, you’ll be charged interest on the outstanding balance.
As well as that, if you’re considering a mortgage application, lenders may see frequently late credit card repayments as two things:
- A sign of bad money management.
- A lack of funds in your account for repaying your mortgage.
If this is the case, your mortgage application may be rejected.
The best way to use a credit card is to always pay your statement balance in full and on time each month, or at least pay off as much of what you owe as possible.
10. What do I need to apply for a credit card?
To receive a credit card, you must:
- Be over 18 years of age
- Have a good credit history without multiple loans or large debts
- Have an annual income over a certain amount, usually, at least €16,000
During the application process, you may also need to provide proof of identification and proof of address.
When your application is submitted, you may get approval in 24 hours from some providers, while others may take a few business days, as they consider your financial history and personal circumstances.
11. Who has the best credit card in Ireland?
This will really depend on your needs. Consider whether you want:
- Cashback rewards
- To add an extra person
- Mobile payment capabilities (Google or Apple pay)
At bonkers.ie we compare all of this and more, allowing you to make the best decision for your needs.
12. How do I compare credit cards?
Comparing credit cards can be tricky, but bonkers.ie makes it easy.
Our credit card comparison tool allows you to compare interest rates, features, and balance transfer options from Ireland’s leading providers.
For more information, we also reviewed the different credit cards in this guide to help you determine which card best suits your needs.
Compare credit cards on bonkers.ie
Our free credit card comparison tool will show you the best options to suit your financial needs from all of Ireland’s main providers.
We also have tools for comparing energy, broadband, insurance, and other banking products.
Our services are free, impartial, and easy-to-use, making it simple for you to save on your everyday bills!
Have questions about your finances?
We have a range of helpful articles that will help you in making better financial decisions.
- We explain 28 general banking terms in this guide.
- If you’re looking for a new home for your money, then consider learning how to switch current accounts.
- Discover which bank has the best mobile app for monitoring your finances.
Keep track of our banking blogs and guides pages, as we update them regularly with financial advice, top tips, and news.
Get in touch with us
If you have any further questions about credit cards, don’t hesitate to get in touch. We’re on Facebook, Instagram, and Twitter, ready to help.
Main sources
Ccpc.ie, centralbank.ie, citizensinformation.ie, creditunion.ie, mabs.ie, mmpi.ie.
