Credit cards explained - a guide to how credit cards work

Credit cards can be a convenient way to make purchases both on the high street and online. As long as you spend responsibly and can repay what you need to each month, credit cards can be a good way to spread the cost of purchases. Having a credit card with one provider can help you keep track of your spending.

What is a credit card?

As the name suggests, credit cards are a form of credit, letting you borrow money with the understanding that you’ll pay back what you owe over a period of time. They can make it easier to keep track of your spending and spread the cost of:

  • Bigger planned purchases
  • Everyday spending
  • Unexpected costs or bills


Choosing one credit card provider can help you keep could also help, because you’ll be able to see and manage everything in one place.

How do credit cards work?

With your credit card you’ll be able to make purchases both online and in-store. The process of paying by credit card is simple. Just like with a debit card, you can pay using contactless technology or Chip and PIN. The amount you spend will then be charged to your credit card.

Once a month you’ll receive a statement detailing the total amount of your purchases within that period, along with the minimum payment needed, and when it has to be paid by. Depending on your terms and conditions, you could also have to pay interest and fees.

What features and benefits can I expect?

A credit card is a flexible and convenient way of borrowing money in the short term. It can offer interest-free, short-term credit on purchases, as long as you always pay the balance in full and on time, or you have an interest free promotional rate for purchases. It’s a safe and versatile way to pay for goods and services and offers protection against fraud. Some credit cards allow you to transfer a balance from another credit or store card, however a handling fee might apply. Find out more about balance transfers.

If you pay your balance in full every month so you don’t get charged interest on purchases, please consider whether making a transfer is right for you. Purchases only stay interest free if you pay the whole balance (including any transfers) in full every month, or you have a 0% promotional offer for purchases.

Your credit limit is based on an assessment of your income and borrowing commitments. We’ll confirm your limit after your application is accepted and this figure will appear on your monthly statements. If you would prefer a lower limit you can decrease it at any time after your card has been activated. If you would prefer a higher limit, after six months we can review your credit limit based on an assessment of your ability to pay the new amount.

Your credit card also offers protection on purchases, which should give you added reassurance when making larger purchases.

Learn about other account benefits.

Your responsibilities

Your biggest commitment is to pay back what you borrow (plus any interest) and stay within your credit limit. By managing your account carefully you’ll avoid additional fees and charges, the risk of losing any promotional offers and any negative records being added to your credit file, which is important if you want to apply for credit in future. Lenders take your credit history into consideration when making lending decisions on things like credit cards, mortgages, loans etc.

As detailed in the terms and conditions of your account, you need to make at least the minimum payment each month by the due date detailed on your latest statement. That said, we always suggest paying more than the minimum each month to reduce the time it’ll take and the cost of repaying your balance.

There are a number of ways to pay, including online payments and Direct Debit. Find out more about making payments to your credit card account.

What are the risks?

  • Standard interest rates will apply to all transactions after the promotional period has ended/your promotional rates have expired.
  • Charges apply if you miss or make a late payment, go over your credit limit and for some transaction types. Learn more about fees and charges.
  • You’ll lose any active promotional offers if you go over your credit limit, make a late payment or miss one completely.
  • Failing to manage your credit card account carefully could affect your credit record, which might affect your ability to get credit in future.


What else should I consider before I apply?

If you need to take money out of a cash machine, remember that credit cards are different to debit cards - interest and charges might apply. If you make transactions or withdraw cash overseas, you may also be charged.

When you apply for a credit card, we'll usually check your credit history with a credit reference agency. Making repeated applications for credit within a short period of time could have a negative impact on your credit rating.

You can close your credit card account at any time. It’ll only show as closed at the credit reference agencies once your outstanding balance is cleared.

Credit cards have many advantages, but do your research. Consider if another option would suit your needs better.

Applying for a credit card

We offer credit cards with benefits to suit a variety of needs - compare credit cards.

Start with Clever Check - our credit card eligibility checker. It’ll show you the MBNA credit cards you’re eligible to apply for, the likelihood of being accepted and your estimated credit limit - all without affecting your credit rating.

The form is easy to complete and our checks take a matter of seconds... you could even get a pre-approved offer (which is the closest thing to a guarantee we can give). Clever Check is a quick and easy way to see if we can meet your borrowing needs before you spend time completing a full application.

If you want to increase your chances of accessing better offers and a higher credit limit, it might be worth looking at ways to boost your credit rating before you apply.

If you’d like to read more about applying for credit before you get started, check out our related guides.

Already an MBNA customer?

You don’t need to get a new card or change provider to take advantage of a new card with features and benefits to suit your current needs. You could apply to swap your existing MBNA credit card instead.

Just bear in mind, if you switch cards you’ll lose any promotional rates you currently have, and your new card will have its own set of terms and conditions (make sure you read those carefully).