A credit card can be an easy and affordable way of getting access to credit, especially compared to alternatives such as payday loans. It is however important to learn about the terms and conditions beforehand, because carrying a balance on a credit card can be very expensive and the cost of compound interest can quickly become a huge drain on the household economy.

Responsibly used, a credit card can be a great way of keeping track of expenses, collect reward points, get discounted offers, and obtain various type of consumer insurance. Even those who normally dislike making purchases on credit can benefit from having a credit card as a back up in case of emergency. When an emergency strikes that can’t be handled with the help of savings only, it is great to have an affordable credit line at hand already instead of hastily having to look for credit solutions in an already stressful situation.

It should also be noted that in the United States, one way of improving your credit score is to have a credit card and use it regularly. Never using credit can actually prevent you from reaching a really high credit score, since prospective lenders and employers are interested in knowing how you have handled credit in the past. Your credit score can have major impact when you want to negotiate a home mortgage loan or are applying for a job where you will be handling money or other valuable objects. It is therefore often a good idea to have a credit card and use it, e.g. to pay your monthly bills or get groceries. By selecting a credit card with no annual fee and always paying back the full amount before it starts costing you interest, you can gradually build your credit score without paying any extra.

What is the different between a charge card and a credit card?

Charge card

With a charge card, the full balance must be paid each month. You get your charge card bill and you pay it in full – without carrying any balance over to the next month.

N.B! There are some charge cards where you only have to settle your debt every other month, but they are much less common than the monthly charge card.

Credit card

With a credit card, you have more flexibility when it comes to paying the bill. You can pay the bill in full or you can pay only part of the bill and carry the rest of the balance over to the next month. Before you decide to only pay part of the bill, make sure that you know A.) How much interest you will be charged on the remaining amount, and B.) How large the minimum amount to pay is. If you don’t pay off even the minimum amount of your debt, you are violating the terms of the credit agreement and this can have costly consequences and may even reduce your credit score.

N.B! With some credit cards, you actually have more than 30 days of interest free credit. There are for instance credit cards that doesn’t start charging interest until day 55.

A few examples of points to keep in mind when comparing credit card offers

Annual fee

What is the annual fee for this credit card? Is it worth it for you?

Some credit cards come with no annual fee, others have a fairly diminutive annual fee, and then there are credit cards that are quite expensive to have. Expensive credit cards tend to come with various perks, e.g. attractive rewards programs, a high credit limit and concierge services. Having a credit card with a high annual fee might for instance be worth it if you drive many miles per year and the awards program for gasoline purchases with this card is so great that it more than makes up for the cost of the card.

Billing fee

Will you be charged a fee for each credit card bill that is sent out?

Paying interest

  • At what point will the lender start charging interest on your debt?
  • How high is the normal interest rate?
  • If you can’t pay even the minimum amount one month, what will this do to the interest rate for A.) That minimum amount that you didn’t pay B.) The rest of your debt.

N.B! Even if you keep up with your minimal payments to this credit card provider, the interest rate charged on your credit card debt can increase if you default on any other debt and that lender reports that default.

Late fees etc

If you don’t pay even the minimum amount one month, will you be charged a late fee? A reminder fee? Any other fee? How large are these fees?

Grace period

Is there any grace period available that you can utilize if you have trouble paying even the minimum amount one month? A grace period can be a great resource if you need help to get through an especially tough month without getting into trouble with your credit card provider.

Cash withdrawals

Many credit cards have special terms for cash withdrawals that makes a cash withdrawal more costly for you than a purchase. It is not unusual for interest to be charged from the day of withdrawal, and there might also be withdrawal fee. If you regularly need to make cash withdrawals, it might be a good idea to complement your credit card with a traditional ATM card.

Cash withdrawals abroad

Cash withdrawals abroad can cost more than what you pay when you withdraw within your country, and some credit card companies use an exchange rate that isn’t very beneficial for the consumer.

If you travel a lot, you might want to get two credit cards – one that has the best terms and conditions for domestic use and another one that has the best terms and conditions for use abroad.

Loyalty programs / Reward schemes / Cash back, etc

Some credit cards are tied to loyalty programs, reward schemes, cash back schemes, etc. If you spend a lot through your credit card, such programs can be worth a great deal.

Which program that is best for you will depend on your spending habits.


Many credit cards come with various types of insurance, e.g. travel insurance, car rental insurance, common carrier accident protection, enhanced warranties, damage coverage, and general consumer protection insurance for purchases made with the card.

Continually keeping an eye on your spendings

Is there a service that allows you to log in online at any time to see a list of all your purchases and other important information about your line of credit? This isn’t only useful to keep track of your spendings; it is also a great way of noticing fraudulent or erroneous charges as quickly as possible, long before the monthly bill is sent out.