Using credit card online

Why do I need a credit card?

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Nobody likes the idea of getting into debt. But, providing it’s used sensibly, a credit card won’t result in this and can, in fact, offer several financial benefits instead.

Consumer protection

Perhaps the most important benefit of a credit card is that it offers you valuable consumer protection.  Anything you buy with your card which costs between £100 and £30,000 is protected under section 75 of the Consumer Credit Act, which basically means the card issuer is jointly liable if something goes wrong.  Under the more recent Consumer Credit Directive, this same protection is topped up to £60,260.

So, if the shop you’ve bought something from goes bust, or your goods turn out to be faulty, you should be able to claim a refund through the card provider. Debit cards and charge cards don’t offer this protection, which is why it’s always a good idea to use a credit card if you’re making a major purchase – which you preferably then pay off.

Spread the cost

The second biggest benefit of using a credit card is that you can spread the cost of your spending, which can make life much easier if you haven’t got savings in place to pay outright. Some cards offer 0% interest on new spending for a certain number of months, so it may not even cost you any interest to spread this cost either.

Clear debts

Some cards are designed specifically for people who are looking to transfer debts over from an existing card. So-called balance transfer cards offer lengthy 0% introductory periods, giving you the opportunity to pay back what you owe over a year, or often much longer, without being hit by steep interest charges. Balance transfer cards can be particularly useful for people who perhaps want to consolidate balances held on several different cards onto one card, so that they only have one monthly payment to worry about – which is also interest-free.

Do both…

There are also credit cards available for those who want to use their card both for new spending and to transfer a balance across, which usually offer a 0% introductory period for both – albeit sometimes at different time frames.

You should always try to pay off what you owe during any 0% period to avoid paying interest.

Get something back

Some credit cards offer rewards or cashback and these are a good choice for those who always clear their balance every month.

There are all sorts of different rewards are on offer, so try and pick a card which offers ones which will be most useful to you – they can vary from loyalty points which can be put towards money off your shopping, or days out, to air miles or vouchers which can be spent in certain stores.

If you are not able to clear your credit card bill in full every month, which many of us can’t, then interest charged on these cards will soon outweigh the benefit of any rewards earned.

It’s always a good idea to use a credit card if you’re making a major purchase

Can I get a credit card if I’ve got a bad credit rating?

If you have a poor credit rating, you won’t be able to qualify for the best deals but you also shouldn’t assume that you won’t be able to apply for a credit card. In fact, some providers offer cards which can actually help you improve your credit rating. You are usually offered a low initial credit limit, and then once you have demonstrated that you can use the card responsibly and make regular monthly payments, this limit will increase.

However, bear in mind that cards for those with a poor credit history usually have much higher annual percentage rates (APRs) than cards for those with higher credit scores, because these borrowers are considered a higher risk. So always try to pay off what you owe in full each month.

Read our guide Advantages and Disadvantages
 

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