10 reasons to use a credit card

The perks of spending with a credit card go far beyond simply spreading the cost. Here are our top 10 reasons to put it on plastic.

Do you use a credit card and, if so, why? Is it just to spread payment costs when you don’t have the ready cash to hand? That’s a very common reason but there are many more great benefits to putting your purchases on plastic.

Here are our top 10 reasons to put it on plastic:

To spread payments

One of the major perks of a credit card is that you can spread the cost of a purchase if you can’t afford to pay for it in one go.

But if you’re using your card for this purpose, do you have the right one or are you paying more than you need to? Some cards offer lengthy interest-free periods for new customers, while others have a lifetime low interest rate.

The best 0% offer at the moment is the Sainsbury’s Credit Card, which gives you a full year to pay off your purchases without incurring interest. Once the 0% offer ends you’ll pay an annual percentage rate (APR) of 15.9%.

If you’d prefer a long-term low standard rate, the best credit card is the MBNA 6.7% Low Rate deal. As its name suggests, you pay 6.7% on purchases, and also on balance transfers for which there’s no fee.

To cut the cost of existing debts

If you owe money on an existing credit card you may be able to reduce the cost by transferring it over to a card charging a lower rate of interest. This is known as a balance transfer.

So, if you want the longest possible interest-free balance transfer period, the market-leader at the moment is the Gold Mastercard from Clydesdale and Yorkshire banks.

For a 3% fee, you get 16 months interest free, after which you’ll pay just 11.34% on your transferred balance. Purchases incur interest at 16.9%.

Cardholders who want to transfer a balance to take advantage of a 0% offer, but who also want to use their card to fund a large purchase should consider the Virgin 12/12 Credit Card, giving them 12 months 0% interest on both.

After that first year, you pay 18.9% APR, so aim to repay the balance by then.

To spend overseas

Changing money can be an unexpectedly high cost for holidaymakers and this is another area where having the right credit card can help.

Most credit cards levy charges if you use them abroad but a few don’t. For example, the Post Office Credit Card doesn’t levy any fees for overseas’ usage. It also offers a three month interest free on purchases. If you don’t clear the balance each month after that introductory period, you’ll pay a typical APR of 16.9%.

To protect your purchases

Paying with a credit card can actually give you greater protection than a debit card or cash.

When you spend between £100 and £30,000 using your credit card, the card provider becomes jointly liable with the seller, under Section 75 of the Consumer Credit Act 1974.

That means if the items are faulty, wrong or simply don’t show up, you can ask your card provider for a refund. Although you’ll usually chase the original seller to settle your complaint, it does mean you have an extra route to claim a refund through.

You can learn more about this credit card protection by watching our video ‘Get protected by paying with plastic’.

To earn cashback

If you pay your credit card off in full each month, a cashback card could be great as you’ll earn money each time you spend on the card. 

The leading cashback credit card is the American Express Platinum Cashback card, which pays 5% for the first three months up to a total spend of £2,000 – meaning you could make £100 within just a few weeks. After that you earn up to 1.25%, depending on your spend. Typical APR is 19.9%, so it’s important to clear this card completely each month.

Alternatively, the Barclaycard Platinum pays up to 1% and charges 15.9% APR. However, with its Barclaycard Freedom scheme, you can earn cashback at more than 30,000 retailers and then choose to use that reward money when you enter your PIN. Check out our video 'Spend money, make money'.

To earn airmiles

Some people don’t want cashback, rewards like airmiles are worth more to them. Using an airmiles credit card means you can earn discounts on flights or even free travel, just for spending on your credit card.

For example, the BMI American Express Credit Card gives you 20,000 destination miles as long as you spend £250 on the card within the first 90 days. After that, you earn 1.5 miles for every £1 spent (4.5 miles for every quid you spend on BMI flights).

You also get 0% on purchases for three months, after which you’ll pay 15.9% APR.

To build your credit rating

Maybe you’ve damaged your credit rating in the past by mismanaging your borrowing, or maybe you have a low score because you’ve never used credit.

Either way, you can build your credit rating up using a credit card – but you have to use it sensibly.

Ideally, you want to repay a credit-builder card in full each month, not just because that will make you look responsible and rebuild your score more quickly, but also because the APR on credit-builder cards tends to be really high.

The best credit card designed specifically for building up your credit rating is the Barclaycard Initial, which texts you reminders five days before your payment becomes due.

But with APR at 29.9%, you’ll want to repay it in full each month.

To donate to charity

Not everyone wants to make a regular charitable donation but there are credit cards out that that pay a small amount to a charity of your choice every time you spend.

It’s worth noting that these cards aren’t necessarily the most competitive – you would probably earn more using a cashback card and then donating the money you make. However, plenty of us don’t have time to worry about that and find it easier to use a card that makes a regular donation for us.

Usually, you choose a credit card for the charity it’s aligned with, however, there’s a great new card from Virgin that allows you to pick the charity.

The Virgin Charity Credit Card pays 80p to a charity of your choice for every £100 you spend with the card, and that rises to £1 for every £100 with Gift Aid. You pay a typical APR of 12.9% on purchases.

To get great discounts

It can be worth carrying a credit card simply to take advantage of the discounts it comes with. There’s no obvious market leader when it comes to discounts, because not everyone will find them useful.

However, a really good example is the Virgin Credit Card, which gives you discounts on Virgin products, including 10% off Virgin Holidays, 10% off Virgin Wine and Vie at Home, one month free at Virgin Active and 50% off balloon rides.

So, if you’re a regular balloon ride shopper…

To save money on groceries

Other credit cards are affiliated with supermarkets, so it may be worth looking at the deal offered by your preferred shop.

Maybe you could earn cashback, points or discounts on your regular shop. The more you spend, the more you can save – so for large families, this could be a particularly good reason to use a credit card.

It’s hard to pick a leading card because it depends on where you shop, but here’s a rundown of the cards from the two main supermarkets – Tesco and Sainsbury’s.

The Sainsbury’s Nectar Credit Card gives new customers two Nectar points for every £1 they spend instore during the first two years and 1 point for every £5 they spend elsewhere.

You obviously need a Nectar card to make use of this credit card, but these can be picked up for free from Sainsbury’s. Once you’ve collected them, 500 points = £2.50 at a number of retailers, including Sainsbury’s. Alternatively, a few places (including Alton Towers and Thorpe Park) give you £5 for every 500 points.

You pay APR of 12.92% and there’s no fee for balance transfers.

Another good option for Sainsbury’s shoppers is the new American Express Nectar Credit Card, which gives you 5,000 extra Nectar points if you spend £500 with it during the first three months. It has typical APR of 19.9%.

The Tesco Clubcard Credit Card gives you 1 point for every £4 you spend and that’s on top of your usual Clubcard points. The APR is 16.9% but you do get 0% interest on purchases for 12 months and 0% on balance transfers for six months (there’s a 2% fee).

Clubcard points can be redeemed in store or at Tesco petrol stations or even spent on days out or airmiles.

Keep your credit score sparkling

Whatever the reason you use a credit card, keep an eye on the market to make sure you’re carrying the most competitive card for you.

By monitoring your credit file and keeping your score as high as possible, you maximise your chances of being able to move to new market-leading deals.

Please note: Any rates or deals mentioned in this article were available at the time of writing. Click on a highlighted product and apply direct.

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