Find out about borrowing in this simple guide
Understand that it costs money to borrow money
When using your credit card, you may need to use more money than you currently have. Your credit card will have a credit limit which is the maximum amount of money the card provider will let you borrow at any time. They will expect you to pay back the amount you borrowed, along with interest charged for borrowing the money. These costs and the associated fees explained below make up what we call the APR (Annual Percentage Rate).
What is "APR"?
APR Definition by The FCA (Financial Conduct Authority):
"APR stands for the Annual Percentage Rate of charge. You can use it to compare different credit and loan offers. The APR takes into account not just the interest on the loan but also other charges you have to pay, for example, any arrangement fee. All lenders have to tell you what their APR is before you sign an Agreement. It will vary from lender to lender."
A straightforward Annual Percentage Rate (APR) definition is the interest rate that is calculated on certain regulatory assumptions, to work out what interest you would pay over a whole year. The assumption is that £1,200 is borrowed in full on day one, and is repaid in full over the following 12 months. The resulting calculation of the amount paid for borrowing will be the APR.
What does APR include?
APR is the cost of borrowing as explained above and any associated fees a lender might charge to have the card, for example an annual fee. If a lender charges an annual fee then this will be taken into account with the interest charged to work out the APR. We do not currently charge annual fees on our Creation cards. If a lender does make any additional charges for the account then the total APR is calculated to take those into account. An example in pre-contract information will give examples of the cost of borrowing on that credit facility.
What does "Variable" mean?
On our credit card accounts, as with most credit cards in the UK, the interest is expressed as “variable”. This means that it could fluctuate throughout the duration of the Agreement, depending on national rates of interest at the relevant time; you will be told of any changes in the interest rate (and APR) with at least 30 days’ notice.
Will I get the advertised Representative rate of APR?
Not necessarily; if you see the term “Representative APR” this is a guide to indicate that at least 51% of all accepted applications will get that advertised Representative rate. Each individual applicant is assessed on his or her creditworthiness, and is given the best rate according to their circumstances.
How do I know what APR rate applies to me?
You will have to complete a credit application for the card for which you are applying. Once this has been done, the company will review your application, by undertaking credit scoring and cross checking your application with a credit reference agency and fraud prevention bureaux. You will then be informed of our decision, and which rate of interest and APR you have been allocated. With Creation, this is provided instantly when you are accepted for the card. Upon acceptance, your card will be sent to you within 7 to 10 days. You will then have to phone our UK-based call centre to activate the card when you receive it.