How credit card interest works
Credit cards in the UK are FCA-regulated revolving credit. The representative APR you see in adverts is what at least 51% of accepted applicants get, your offered rate can be higher. If you pay the full statement balance by the due date, the interest-free period (typically 25 to 56 days) means you pay nothing. If you carry a balance, interest is charged daily on the full outstanding amount. The minimum payment is usually whichever is higher of 1% of the balance plus interest and fees, or £5.
A £3,000 balance at 24.9% APR, paying only the minimum each month, takes roughly 25 years to clear and costs around £4,000 in interest. Pay £100 a month instead and the same balance clears in around 3.5 years with about £1,200 in interest. A 0% balance transfer card (typical fee 3%) can wipe out the interest entirely, but you must clear it before the 0% period ends.
Using the cash advance feature on a credit card to withdraw cash. There is no interest-free period; interest starts immediately at a rate often higher than the purchase APR, plus a cash advance fee. It is one of the most expensive forms of borrowing legally available.
A 60-second lesson on this, with a worked drill, lives inside the Finlo app. Free, forever, on the basics.