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The advantages and disadvantages of credit cards

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If you use a credit card cleverly then it’s possible to borrow for no cost, get extra protection on your purchases and even earn cashback or rewards for spending on your card.

But, if you don’t act with discipline you could end up paying lots of interest and racking up debts that are a struggle to pay off. 

So what are the pros and cons of having a credit card – and what is the best way to apply for a card and get accepted? 


The pros 


If you need to buy something expensive and can’t afford to pay for it all in one go, then a credit card is ideal, as long as you use it sensibly. 

A 0% purchase credit card allows you to pay for the item in full and then spread the costs over a number of months, by making a series of payments to clear the balance. 

As long as you pay this total off before the end of the interest-free period then you won’t get charged anything for using the card in this way. But miss this deadline and you will pay a penalty in the form of interest being added to the balance each month. 


You get more protection if you pay with a credit card than if you pay with a debit card, cash or cheque under something known as Section 75 of the Consumer Credit Act. 

If you buy something that costs between £100 and £30,000, you will get your money back if it all goes wrong. In other words, if the company goes bust, or your purchase is faulty or doesn’t turn up, you won’t lose out because you can claim the money back from your credit card provider.

You’ll also have protection if your card is used fraudulently as your card provider should refund the money. This won’t work though if your card provider finds that you were negligent so make sure you don’t write your PIN number down anywhere.

You get more protection if you pay with a credit card than if you pay with a debit card, cash or cheque under something known as Section 75 of the Consumer Credit Act.

Borrow for free

Some credit cards offer 0% periods meaning you can effectively benefit from an interest-free loan. You need to make the minimum monthly payments though, and clear your balance before the 0% offer ends though otherwise you’ll be charged interest. 

The average interest rate is 18% - pretty hefty, which is why you should pay your debt off before interest kicks in.

Not everyone needs an extended interest-free period, but even if you pay your credit card bill in full each month, you’ll still ‘borrow for free’. Credit card statements quote that you get ‘up to 59 days interest free’ – what this really means is as long you pay off your bill in its entirety by the due date, you won’t be charged interest. This can be a great help in managing your cash flow.

Earn while you spend

Some cards even offer incentives to spend, such as cashback, loyalty points or air miles, which means you could actually make money from your credit card. These are only worthwhile if you pay your bill in full – otherwise the interest you’ll be charged will be more than the value of the rewards. 

Switch your balance

If you owe money on credit or store cards, taking out a new card could actually be a good option. You'll probably be paying interest rates of at least 18%, but you could cut that to zero by transferring your debt onto a 0% balance transfer card.

There will be a transfer fee to pay of around 3%, but it's usually worth it as it will still be less than the interest you'll be charged if you stick with your existing card.

Ensure you pay your debt off before the end of the 0% period though as you will then be charged interest on any debt you still have. You can use our Smart Search tool to find out how likely you are to get accepted for each card. 

The cons

Beware the debt trap

It's important to remember that a credit card is a form of borrowing. You buy now and pay later - and there are risks.

If you don't pay off your balance in full each month, you will start to rack up interest. Your debt can therefore quickly spiral out of control, particularly if you pay off only the minimum monthly amount.

You should therefore always try to pay more than the monthly minimum and you should think of your credit card only as a short-term borrowing facility. You can find out how your balance is affected by changing your monthly repayment amount with our credit card calculator

Hidden costs

The interest rate is not the only cost of a credit card. A fee will be charged if you are late making your monthly payment, or miss it altogether. You'll also pay a penalty if you exceed your credit limit. So make sure you keep track of your spending and always pay your bill on time.

And don't be tempted to withdraw cash on your credit card. Most card firms charge a fee to withdraw cash from an ATM, typically about 2%. You will also start to rack up interest immediately as there is no interest-free period on cash withdrawals.

Pick the right card

Make sure that you pick the right card otherwise you could end up paying more than you need. If you've got an expensive time coming up, maybe you’re moving house or planning a wedding, you should look for a 0% purchase card.

If you need a new card because you've built up expensive debts on another credit card, it's a 0% balance transfer offer you need. Alternatively, our handy credit card decision tree will help you work out which type of card is best suited to your spending. 

Where to next?

What is a good credit score?

What is a credit card? 

What is a balance transfer card?

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