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Should I get a credit card?

Understanding the pros and cons of getting a credit card

Credit cards have lots of benefits, but can prove expensive if you overspend. This guide takes you through the pros and cons of getting a credit card

Woman on the phone with credit card in hand

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Why should you get a credit card? There are plenty of reasons: you might want to improve your credit score by showing you can borrow responsibly, you could want to earn rewards or cashback on your spending, or maybe you want to spread out the cost of a large purchase.

It might just be so you have the option to claim your money back on expensive items via your credit card provider if the supplier goes bust.

Whatever your circumstances, a credit card can have lots of benefits, as long as you use it sensibly. Here, we explain the main advantages, and offer advice how to avoid the pitfalls – starting with four of the main benefits:

A credit card can improve your credit score

You’ll need a good credit score if you want to take out a loan, get a mortgage or be accepted for the best credit cards on the market. So it can be worth getting a credit card to build your credit rating.

You can check your credit score using our free service, but if you’ve never had credit before, it will generally be low because you haven’t had a chance to prove you can borrow responsibly. To do that, you can use a credit builder card.

These cards are aimed at people with low credit scores who are keen to build a credit history. They improve your credit score as long as you pay your balance off in full each month – but you’ll face high interest charges if you don’t. It’s also vital never to miss a payment date, as this will damage your credit rating more than anything else.

A credit card can protect your purchases

One of the main advantages to buying on credit is that anything you buy is protected by law if the retailer goes bust or supplies faulty goods.

Credit card purchases of between £100 and £30,000 are protected under Section 75 of the Consumer Credit Act. If something goes wrong, your card provider must take the same responsibility as the retailer. So, if you book a holiday or buy a sofa and the retailer goes bust or the goods turn out to be faulty, you can claim a refund through your card issuer.

You’ll even get the same protection if you pay a deposit on your credit card, so long as the whole purchase costs more than £100 and less than £30,000. So you could put a deposit of £75 on your card for a new bike and pay the remaining balance of £125 in cash and you’d still be covered for the whole £200.

You can earn cashback and rewards using a credit card

If you’re going to be spending anyway and want to get something in return, certain types of credit card can give you decent cashback offers, store points or frequent flier miles.

With a rewards credit card, you collect points that can be exchanged for shopping vouchers or other gifts. Using a rewards card for all your day-to-day spending could earn you hundreds of pounds a year – if you do most of your shopping at the correct retailers.

Cashback credit cards offer the most flexible benefits – a percentage of what you spend is returned to you, but the benefits are usually slightly less valuable. If you love to travel, an airline credit card that gives you Air Miles on your spending may be a better bet.

Many rewards cards have an annual fee, so you should be sure you’ll be able to spend and repay enough money to make it worthwhile. And you will certainly need to clear your balance in full each month to make money – otherwise the interest charges will outweigh the rewards benefits. So if you think you’ll struggle to make your repayments, a rewards card probably isn’t for you.

A credit card can offer added benefits

And if you have other needs, certain credit cards come with added benefits such as access to airport lounges or discounts on concert and theatre tickets. These cards often come with substantial annual fees; in some cases they may cost hundreds of pounds a year, so it’s important to make sure you’ll take full advantage of the benefits on offer.

If, for example, the card has a £60 annual fee, it’s only worth taking out if you will save more than that by using benefits such as lounge access and linked hotel loyalty schemes. As with standard rewards cards, you also need to pay off your balance in full each month to avoid interest charges wiping out the value of the benefits on offer.

Other reasons to take out a credit card

There are also times you might want to take out a credit card for a specific purpose, such as managing university costs or paying for your wedding. Here, we explain what type of credit card best suits your needs if:

You’re planning a big purchase

Whether you’re getting married, buying a car or planning a big trip, a 0% purchase credit card allows you to spread the cost for nothing – as long as you pay the full amount off within the 0% introductory period.

Using a credit card for large purchases also means you qualify for the protection offered under Section 75 of the Consumer Credit Act, and can claim your money back via your card company if things go wrong.

However, if you’re unable to pay off the entire balance within the interest-free period, you’ll have to pay interest on any debt on the card – usually at a high APR. This could get very expensive, which is why it’s best to set up regular payments to make sure you clear your balance in time. Not everyone is accepted for a 0% credit card, so you should also use our Eligibility Checker to find out what cards you’re likely to get.

You spend a lot of time overseas

Using a standard credit – or debit – card when you go abroad can be expensive, as many charge fees of up to 3% on foreign transactions. So if you spend £300, you’ll pay any extra £9 to your card provider. However, there are a number of travel credit cards that offer better exchange rates and don’t charge you a fee when you spend on them.

These cards offer a secure way of spending while you’re abroad. But again, they’re not available to everyone, so it’s worth using our Eligibility Checker before applying (you can consider a prepaid card if you can’t get a travel credit card).

Many also come with relatively high interest rates, meaning they should be paid off in full each month. They often have annual fees too, so they really are only worth getting if the savings you make using them abroad are substantial.

You need cash quickly

If you’re facing an unexpected bill, or you want to pay off a debt such as your overdraft, a money transfer credit card can be a good way to get your hands on the cash you need.

These work in a similar way to balance transfer cards, which allow you to transfer your outstanding balance between credit cards, for example because you’re about to reach the end of an interest-free period. With money transfer cards, you transfer money from your credit card to your bank account instead.

Many money transfer cards offer low or 0% interest for a given period. However, interest rates can get quite high after this point, and there’ll usually be a fee for making the transfer. This is generally a percentage of the total amount, and will be added to the outstanding balance on your credit card.

So if the fee is 4% and you transfer £1,000, £40 will be added to your credit card balance and you’ll have to repay £1,040 in total.

You’re off to university

A credit card can be very useful while you’re studying. Not only does it offer increased flexibility when money is tight, it also gives you a chance to build up your credit score – as long as you use it responsibly. Some credit cards are even designed specifically for students.

These student credit cards are generally only available to student current account holders, but come with a number of benefits. You might, for example, qualify for interest-free purchases for a set period, or be able to earn rewards on your spending.

However, student credit cards often charge higher standard interest rates than other types of credit cards, because young people tend to have lower credit scores and represent more of a risk to the lender. This means you’ll face high interest charges if you fail to pay them off in full each month, but on the other hand your credit rating will be sure to grow if you do. As with all other credit cards, you’ll also face hefty fees if you miss a payment.

Compare credit cards

Interested in comparing credit cards to find one that’s right for you? Applying for lots of credit cards can damage your credit score – especially if your applications are rejected. That’s why the MoneySuperMarket Eligibility Checker uses your details to do a ‘soft’ search, meaning we can show you which cards you’re eligible for without harming your credit score, so you know where you stand before you apply.

Just give us a few details about you, your finances and the type of card you want, and we’ll search the cards available from a wide range of lenders so you can browse the options available.

Applications for ‘pre-approved’ credit cards via MoneySuperMarket will be accepted at the duration, fee and representative APR show in the results. The only thing we can’t tell you is what your credit limit will be.