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A Guide to Credit Cards
Providing you can manage your money well, credit cards are a handy way to make purchases. Many cards come with special deals, like top cash back offers and other benefits and with so many available, there’ll be one to suit all needs.
It can be a bit baffling, though, when you’re looking for the best credit card, especially if you haven’t had one before.
Whether you’re looking for balance transfer credit cards, 0% interest free credit card deals or you are looking at credit cards for bad credit history, our money saving expert tips will help you find the best deal.
We’ve put together a quick guide to help you understand credit cards and make sure you make the right decision.
How do credit cards work?
Using a credit card is a bit like getting a small loan to buy something. When you use your card in a shop or online, you are basically borrowing money from the card company.
Then, at the end of the month, the card provider will send you out a statement to tell you how much money you owe them. You can pay the balance all in one go or pay a little bit off each month. If you do decide to pay it off each month, you will be charged interest.
Advantages and disadvantages Of Credit Cards
It may seem pretty straightforward, but using a credit card requires a fair degree of management if you are going to extract all the benefit from it.
Credit Card Advantages
*It can be a really handy way of managing your finance, providing you pay off all your balance each month. That way, you’ll be able to benefit from free borrowing over a short period.
* Purchasing goods with a credit is safe no matter where you are. They can be used abroad to pay for services or products. They are also a handy and secure way to pay for things online or over the phone.
* Any purchases over £100 on your credit card will be protected by the law. This an added advantage for credit card uses as the same does not apply if you use cash or a debit card.
Under Section 75 of the 1974 Consumer Credit Act, your credit card provider and the retailer are both responsible for anything that goes wrong with your purchase. If the goods are defective or the company providing them goes bust, you will be entitled to a refund from your card company for any purchase between £100 and £30,000.
* Your card provider will not make you pay if your card is stolen or used fraudulently, so you’ll be protected against any criminal activity on your credit card.
* There are a whole range of enticements for using your credit cards. Some companies may offer cash back or extended periods of 0% interest on borrowing or balance transfers. Your provider may even make payments to certain charities or allow you to accumulate loyalty points on your card.
* One big plus for credit cards is that they can be used almost anywhere in the world, meaning you’ll never be stuck.
* Easy to use, safe and secure, a credit card, when used sensibly, can be an excellent way to manage your money.
Credit Card Disadvantages
*Costs can really mount up if you don’t pay your full balance each month as interest will be added on every month after that. Depending on which card you take out, the interest rates can be quite different. It’s best to go for a card with a low interest rate if you aren’t able to pay off your whole balance each month.
*Many cards will only allow you spend a certain amount and if this is your first credit card, this can be quite low. You’ll probably find that first-time cardholders will be given a credit limit of around £300 to £500.
You’ll be able to get a higher limit if you have a good credit rating and decent history of borrowing and repaying cards and loans.
But, in the current climate, many credit companies have been much more careful about how much money they are willing to lend. Therefore, if you are in the market for a new credit card and have an excellent credit rating, there’s a good chance you’ll be offered a much lower credit limit than you may have been before.
If you need more information or advice on choosing the right credit card, give our expert team a call on [creditcardnum].