How much does a credit card cost?

How much does a credit card cost?

There are various considerations when analysing the cost of a credit card. The most obvious item is usually the APR as it is mostly advertised. However, the true cost of credit includes not only the APR but also interest rates, late fees and annual fees. It is important to consider all of these items before applying for a credit card.

How much does it cost to have a credit card?

Things to consider are:

APRs and interest rates

If you do not pay off the full amount due every month, you are charged interest on the outstanding amount. An APR will include the interest rate and any annual fees on the account and is often used as a comparison against similar products. It will not include other fees such as late fees or default fees.

The way the APR is calculated has been standardised by the Consumer Credit (Advertising) Regulations 2004, contributing to improved transparency.

Interest is normally charged on a daily basis on all the amounts shown on the statement, if you -


You can benefit from an interest free period if you pay off the whole balance for purchases on your monthly statement before the due date. There is no interest free period for cash.



Interest is charged at different rates for different services even if you are using the same card. The different rates will be explained in the terms and conditions given to you when you apply for the card. This information should also be contained in a Summary Box. For example:

Late fees

If you fail to make the minimum payments on time you will be charged a fee for late payment. The amount of the fee is usually between £10-£25, but can be more depending on which company your card is with. In certain circumstances, if you contact the company, it may remove the late fee.

Over limit fees

If you go over the credit limit on your credit card, you may also be charged a fee which is generally £25.


Annual charges

Certain credit cards may also have an additional annual charge or fee depending on the credit card company.

Some facts and figures about credit card spending in the UK:

  • The total credit card outstanding debt rose to £53.5 billion by the end of 2003 — double what it was in December 1998.
  • The average credit card debt per cardholder was £1,658 at the end of December 2003. The average cardholder has 2.2 credit cards.
  • 54% of credit cards are paid off in full every month. These credit cards account for 77% of all credit card spending. Only 3% of credit card holders pay the minimum payment every month.

Source: APACS


Additional "add-on" features

Many cards offer additional "add-on" features including:

Using a credit card to make cash withdrawals

You can withdraw money with your credit card. This incurs a handling charge of typically 1.5% of the amount drawn, with a minimum charge of £1.50. Therefore, if you need to draw money out on a regular basis, consider drawing out larger amounts less frequently but remember interest is usually charged from day one.

Further information

The UK payments association, APACS, has created www.choosingandusing.co.uk, which provides free and impartial information about choosing a credit card and using a credit card.