CREDIT CARD ADVANTAGES AND DISADVANTAGES

As the owner of (ahem) a fair few credit cards, I thought I would present a case for and against. Also known as credit card advantages and disadvantages.

Credit cards can get a bad rap but there are definitely, in my eyes, some major plus points for having one or two. So without further ado, let’s look at credit card advantages first.

ADVANTAGES

A Good Credit Score

This, I would say, is one of the main advantages. A credit score is a means of showing whether you’re likely to be accepted for credit or not. If you have a good credit history of owning credit cards and paying them off on time, that counts toward your credit score.

Equally, your credit score is not affected if you check it, and as a by-the-by, the higher your score, the chances are you’ll have access to better interest rate deals.

Your credit score would also be checked when you’re applying for a mortgage or a bank loan. At any rate, to see how you’re currently doing on yours, you can do a free credit check on Experian.

For Emergencies

Should that be something that goes kaput with your car, within your home or, insert a.n.other. My shower springs to mind when water was cascading from the bottom as opposed to the shower head at the top. Ho hum.

Buy before payday

A convenient way to buy something before payday. Generally, an interest-free credit period of up to 56 days, check your small print (but don’t forget to pay it all off on payday, tut-tut).

Membership perks

Some cards offer free travel insurance, frequent flyer points, cashback rewards, and entertainment deals. Here’s a couple you might want to have a peek at, Barclaycard and Mastercard Priceless.

In addition, some supermarkets, for example, Tesco and Sainsbury’s, also have a banking element and provide credit cards which can have good rewards too.

Protection of goods and services purchased

In the UK, you’re also covered under Section 75 of the Consumer Credit Act, when you purchase goods and services with your credit card. With regards to value, the goods/service must be over £100 but under £30,000. Particularly useful if the supplier goes bust or keeps ignoring your SOS communications.

Another example is if you haven’t received said goods/services or if they don’t match what was specified. Particularly these poor souls. I’m not sure what my favourite is; the teddy bear in his chilled waving pose or the dog getting comfy on his doggie bed…

DISADVANTAGES

Temptation Central

Easy to spend especially if you feel like cheering yourself up whilst at the same time yelling ‘I AM ABUNDANT!’.

Interest rates

The idea is to get a 0% introductory rate however like most good things, they always come to an end. Make sure you diarise when you’re going to start being hit with an interest rate hike.

If you’re no longer on 0% then be aware of compound interest. See also 5 Reasons Why You Need A Money Management Worksheet.

It’s so easy to just keep making the minimum payment but if you do so then it could be years before your card is paid off. Not only that but the difference between what you’ve spent vs what you end up paying back will be HUGE.

Just paying an extra £5-£10 a month can make all the difference. Check out how you’re faring on a credit card calculator here

Cash withdrawal fees

Withdrawing cash from your card can be more costly than using it to pay for goods or a service. Therefore make sure you read the fine print to avoid having a nasty surprize when you open your next statement.

Fraud

Scammers love using someone else’s credit card. However, although this is a disadvantage, an advantage is that if you notice something on your statement that isn’t yours and report it promptly, you usually won’t be liable. The Consumer Credit Act 1974 allows you to claim back unauthorised payments due to fraud.

Additionally, having been on the receiving end of a scammer, I’ve had my credit card company call me up to query a payment. As much as I would have loved an all-singing and a-dancing kitchen, purchasing one at the far end of the country, they realised, wasn’t my normal modus operandi.

Check out keeping your card safe online.

Misuse

You can damage your credit rating if you don’t pay on time. So either set up a direct debit or make sure you diarise each month so that you don’t miss a payment.

SYNOPSIS

If used sensibly then credit card advantages far outweigh the disadvantages.

The main thing is that if you can’t pay it off in full each month, then to always overpay and pay more than the minimum.

Have an end goal too when you want to have it cleared by.

If you’ve got yourself a 0% deal over 12 -24 months then it’s easy peesy to divide your balance by the requisite months to get it cleared.

Oh and make sure you check your credit card statement!

How are you with credit cards? A ‘hell yeah sign me up!’ or a ‘hell no I run a mile from them’. Let us know in the comments!