Is a credit card right for me?
Credit cards offer convenience, rewards, the opportunity to repair your credit file and even the chance to reduce debt. But it's essential to understand the ins and outs before applying.
Key takeaways
Credit cards can be powerful financial tools as long as you can comfortably afford the repayments
Different credit cards serve different purposes so be sure to choose one that aligns with your needs
Eligibility opens up at 18, but some providers set a minimum age of 21
An agreed overdraft on your current account can be an alternative to a credit card for short-term financial gaps
What are the benefits of using a credit card?
Credit cards are not just for spending; they can be powerful tools for managing your finances and improving your credit score. Here are some of the practical uses of credit cards:
Spreading the cost of larger purchases
With an an interest-free credit card, you can purchase goods or services and spread the cost over time.
Credit cards offer protection for purchases over £100 and under £30,000, so there's an added layer of protection if there are issues with your purchase.
Improving your credit score
A credit card can be a stepping stone to a better credit rating and lower interest deals when you want to borrow in the future. By using your card responsibly, you demonstrate to lenders your ability to manage credit.
For those with poor credit histories, there are even credit builder credit cards specifically designed to help improve your score.
It's worth noting that managing your credit limit on any form of credit card is also good for your credit rating, so the benefits aren't just for those using credit builder products.
Moving an existing card balance to a new card, or clearing an overdraft
This is useful when you're paying interest on a credit card balance and have the option to move it to a new card with an interest-free period – just note the fees, which can be around 3% of the balance you're moving.
Likewise, if you're paying interest on an overdraft, a money transfer credit card gives you the chance to clear the debt and then pay off the card balance at a lower rate of interest.
Earning cashback and other rewards
If you want to be rewarded for your everyday spending, there are credit cards that offer incentives such as cashback, points you can redeem at retailers and air miles.
Be aware they often have high interest rates and annual fees, so be confident that the rewards will outweigh any charges. If you’re not confident you can clear your balance in full every month, this type of card probably isn't for you.
Keeping charges down when you travel
A travel credit card will offer no, or low, foreign transaction fees and more favourable exchange rates, which can be great when you want to spend abroad.
Travel cards rarely cover every hidden charge though, so it’s still best to adopt good financial habits such as paying in the local currency and not using your credit card to withdraw cash from an ATM.
What are the risks of credit cards?
While credit cards have their perks, they also come with risks that should not be overlooked:
Debt risk: If you're concerned about falling into debt, it may be best to avoid credit cards or use them sparingly
High interest rates: If you don’t clear your balance each month, high interest rates can make it expensive to use a credit card
High fees: If you miss a monthly payment or you spend more than your credit limit, you risk being hit with charges. There are also fees for using a credit card at an ATM, including interest charges that kick in immediately
Credit score damage: Missing payments can lead to a lower credit score, which can hinder your ability to borrow in the future
What should I consider before getting a credit card?
There are a number of considerations before applying for a credit card. These include:
What credit card features do I want?
If you have bad credit or no credit history, a credit builder card could help you build up your credit score
If you’re looking to spread the cost of planned purchases, an interest-free credit card can be a cheap way of borrowing
If you want to earn rewards, some credit cards offer cashback, air miles, or freebies like insurance
If you want to move high-interest debt from another credit card, a balance transfer card can help, often with a 0% introductory period
The key is to decide what features you need from a credit card before you begin your search.
Are credit cards safe to use?
Credit cards are generally safe to use, thanks to protections like Section 75 of the Consumer Credit Act, which covers purchases from £100 to £30,000.
Debit cards offer less comprehensive protection, such as chargeback, and it's not as robust as Section 75.
Am I better off just sticking with a debit card?
If you’re worried that you won’t be able to pay off any borrowing or don’t want to get into debt of any kind, relying on a debit card only could be the way to go.
However, credit cards offer more than just the ability to spend. They provide better protection on purchases, can give you rewards and incentives, and the flexibility to make significant purchases quickly and spread costs on 0% interest deals.
Could my credit score be improved first?
Good credit scores result in better eligibility and more favourable rates, so before getting a new credit card, consult your credit report and check for any small improvements you can make.
Our research shows that the average score for people who are on the electoral roll is 41 points higher than those who are not.
Am I old enough to get a credit card?
Turning 18 opens the door to credit card eligibility, but some providers may set the minimum age at 21.
While young people may find it challenging to get approved due to a lack of credit history, specialist credit-builder and student credit cards are available to help you build a credit profile.
Do I understand what APR is and why it matters?
APR stands for Annual Percentage Rate. It’s very similar to the interest rate, but also accounts for any annual fees you’re being asked to pay.
When you take out a credit card, you’ll be told the interest rate you’ll pay on any debt if you don’t clear your balance in full each month.
For example, if you borrowed £100 over 12 months and the interest rate was 10%, you’d owe £110 by the end of the year.
Am I confident I can keep up with repayments?
It sounds obvious, but credit card companies lend you money and they expect it back.
As such, don't spend more than you can afford to repay, and always note down when promotional interest rates end. Setting up a direct debit can help make sure you don’t miss a payment.
Failing to do so can lead to escalating debt and negatively impact your credit rating.
Is there a better alternative?
For larger sums, like home improvements, loans might work out cheaper in the long run.
The average credit limit offered to MoneySuperMarket customers is £2,800i, so if you need to borrow more than this, an unsecured or secured loan might be more appropriate.
You also need to factor in how much you can afford in monthly repayments. Credit cards work best when you clear the balance each month or during the low or 0% interest rate period. If payments are likely to stretch beyond this, a loan may be a better option.
If you don’t want to get a credit card, but have a short-term cash flow issue, then an authorised overdraft can be a convenient option, depending on the interest rate charged.
Either contact your bank to assess this option or look for a new current account that offers an interest-free overdraft when you sign up.
Another option is a prepaid card, which offers all the ease of paying by plastic and can be great for budgeting and spending overseas. A prepaid card is not a credit card though, so you have to load it with funds before using it.
How to choose the right credit card
Selecting the right credit card is a personal decision that depends on your financial circumstances.
For more information, read on for what credit card might be best for you.
Can I get a credit card at age 18?
Turning 18 opens the door to credit card eligibility, but some providers may set the minimum age at 21.
Young people, such as students, may find it challenging to get approved due to a lack of credit history.
However, credit-builder and student credit cards are available to help build a credit profile.
Alternatives to credit cards
If a credit card doesn't seem like the right fit, there are other options:
Loans: Loans can offer access to larger sums of money with structured repayments. However, they may come with early repayment charges if you wish to settle the debt early
Overdrafts: An authorised overdraft can be a convenient option for short-term borrowing
Prepaid cards: Prepaid cards are great for budgeting and spending overseas without borrowing
More helpful guides
If you want to find out a bit more about credit cards, our guides can help
Comparing credit cards with MoneySuperMarket
MoneySuperMarket provides a comprehensive service to compare credit cards and assess your likelihood of acceptance without impacting your credit score.
Whether you're a seasoned cardholder or a newcomer, we can help you make sense of your options.
MoneySuperMarket is a credit broker – this means we’ll show you products offered by lenders. We never take a fee from customers for this broking service. Instead, we are usually paid a fee by the lenders – though the size of that payment doesn’t affect how we show products to customers.
Author
Tim Heming
Personal Finance Expert
Tim Heming is a journalist and editor who has written about personal finance for national newspapers and consumer websites for 15 years. Tim enjoys providing no-nonsense information to help consumers...
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Jonathan Leggett
Former Senior Content Editor
With over 15 years of experience in online content and journalism, Jonathan is a former MoneySuperMarket’s editor at large and works across our Broadband, Mobiles, Energy and Money channels. Along...
