When to use a credit card

Reaching for your credit card when you can't afford to pay for a large purchase with cash savings, might seem unnecessary and even reckless. But there are some clear benefits to using credit cards that you just won’t get from paying cash.

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However, whether you should use plastic or paper currency to pay your bill will come down to your individual circumstances. Here’s a look at when to do what.

Consumer protection

There are two main advantages to making large purchases with a credit card.

First off, there’s the security element. When you pay for something on a credit card, the credit card issuer is jointly liable with the merchant to make sure that the item you bought is delivered to you as described.

This means that if you buy something significant on a credit card, like a new three-piece suite for your living room and it turns out to be faulty or it simply doesn’t arrive, you can set about claiming back the money.

This is thanks to Section 75 of the 1974 Consumer Credit Act, which protects credit card users on anything they buy that is worth between £100 and £30,000.

In the internet age this protection has become even more useful as we spend more money online with merchants we never actually meet face-to-face.

If you found a great deal on some furniture online, for example, and when you went to check the status of your order, found the website, and all trace of the company had disappeared – you could claim all the money back if you’d paid on a credit card.

This protection still applies even if you paid just for the deposit with your card, which is a common way to pay for things like a family holiday or a new car.

What’s more, since last year, the Consumer Credit Directive has protected credit card users further, on purchases worth between £30,000 and £60,260.


The second benefit of using a credit card to fund your purchase, is the element of convenience and money management. Paying with a credit card allows you to spread the cost of a purchase over a longer period if you want to.

There are a number of credit cards on the market which charge 0% interest on new purchases for a set amount of time. Providing you clear the balance before the end of the 0% period, you can spread the face value of the cost without paying a penny in interest.

This could be particularly shrewd, even if you do have the money in savings, as it means you can leave the cash there to continue earning interest.

What other benefits do credit cards offer?

If you’ve already got a balance to pay off on another card but don’t seem to be getting anywhere, it’s probably because the interest rate is too high. Transferring your balance to a different card that offers 0% on balance transfers will mean you can stop paying interest on the debt until you clear the balance. 

If you are away on holiday, it can also be cheaper to use a credit card for your spending, rather than forking out for currency exchange fees every time you change up cash. The Saga and Post Office credit card, Halifax Clarity and Santander Zero do not charge loading fees for use abroad.

Some credit cards, used sensibly, can even help you to build or repair your credit score. Lenders use your credit score to assess your eligibility for credit and having a poor or non-existent credit score can leave you more likely to be rejected for all forms of credit.

What are the disadvantages of credit cards?

If you are not on a 0% interest deal – or your 0% deal has expired – credit cards can prove very costly if you let your balance roll over from month to month, with average representative APRs above 18%. Missing your minimum monthly payments will also mean you incur fees and can have a detrimental effect on your credit score.

The best 0% interest cards also tend to be reserved for applicants with the best credit scores. If you apply for these with a less-than-perfect credit score and are rejected – especially if you do this multiple times – you can damage your credit score further.

However, MoneySupermarket's Eligibility Checker tool can help you limit the chances of being rejected by giving you a score out of 10, based on how likely you are to be accepted for a range of cards – without impacting your credit score.

The convenience element of the credit card can be a disadvantage too, particularly if you’re prone to impulse purchases. You should think carefully about your ability to repay a credit card before you apply and before charging something to the card.

Which card is for me?

If you do want to spread the cost of a big purchase over a longer period, Marks & Spencer is offering 0% on purchases for 15 months with its credit card, which also earns you loyalty points on your spending. After the interest-free period ends the representative rate goes up to a reasonable 15.9% (variable).

If you want to shift debt from one card to another to benefit from an interest-free shelter, the market-leading card is the Barclaycard Platinum Credit Card with Extended Balance Transfer. This gives you 0% on balance transfers for 22 months for a transfer fee of 2.9%. This card requires a good crediting rating though, and a minimum annual income of £20,000.

If your credit score is a little rough around the edges, take a look at the recently-launched Capital One Balance card. The deal, which offers 0% on balance transfers until September 2012 for a 1.7% fee, is targeted at borrowers with ‘average-to-good’ credit scores. However, those with ‘bad credit’ will be unlikely to be accepted – for example if you have been bankrupt in the last 12 months.

If you have bad credit you’ll find all credit cards available to you come with a higher representative APRs – typically 30% or more (variable) as well as low credit limits. But use them responsibly by always clearing your balance, and your credit score should start to improve – eventually putting you in line for the very best 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.

We’re free, independent and compare all UK credit cards, as well as offering exclusive deals you can’t get anywhere else.

Contact MoneySupermarket.com at Moneysupermarket House, St David’s Park, Ewloe, Flintshire, CH5 3UZ. © Moneysupermarket.com Ltd 2011.

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