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credit cards

Is using credit cards a good or bad idea?

68% of adults in the UK – around 36.2 million people – have at least one credit card. There are 58.5 million credit cards currently in circulation, and around 11.6 million credit card transactions happen every single day.

The average credit card debt in the UK is around £1,248 per adult. And around half of us carry our outstanding credit card balance from month to month, building up interest as we do so.

So , overall, is it a good idea to use credit cards? There are pros and cons, and in this article we take a look at:

  • How credit cards work;
  • The advantages of credit cards;
  • The disadvantages of credit cards;
  • How to make your credit card work for you;
  • What to do if you get into debt with your credit card.


How credit cards work

A credit card represents a borrowing agreement between you and the credit card provider – usually a bank. You can make purchases with the credit card up to a pre-agreed limit. Every time you do this, you are borrowing money from your card provider to make that payment.

You need to make a repayment to your card provider every month. You can either repay the credit card balance in full or in part, but you have to pay at least the minimum amount specified by your card provider. If you don’t pay the balance in full, you will usually have to pay interest on the amount you still owe to your credit card provider.

There are different types of credit card to suit different needs, for example:

  • A general purpose credit card for large and small purchases;
  • A rewards credit card with points or offers;
  • A cashback credit card to earn cash incentives on purchases;
  • A balance transfer card to consolidate existing debts;


The advantages of credit cards

As we have just seen, credit cards can be used for a number of different purposes. Let’s look in more detail at the advantages of having a credit card:


  • Credit cards can spread the cost of major purchases

If you buy a new item, such as a washing machine or fridge freezer, on your credit card you can pay for it up front then repay your card provider over a period of months. This enables you to get what you need when you need it rather than having to wait.


  • Credit cards can help with an emergency

If you are faced with an unexpected bill, for example car repairs, an appliance breakdown, or vets’ bills, you can pay by credit card and repay the cost later.


  • Credit cards can offer cashback and rewards

Some credit card providers offer rewards to customers including cashback, loyalty points, shopping discounts, or air miles. It can make sense to benefit from these rewards whilst making purchases that you would need to buy anyway.


  • Paying by credit card offers you consumer protection

Most credit card purchases between £100 and £30,000 are covered by Section 75 of the Consumer Credit Act. This means that if you pay by credit card for a product or service and something goes wrong, your card provider will be equally liable with the retailer and you can claim a refund directly from your credit card provider.


  • Credit card transfers can help to manage existing debts

Some credit cards offer balance transfers at low rates of interest so you can transfer existing credit card debts to a new one. This can be a temporary solution to credit card debt, which we will look at in more detail below.


  • Credit cards can help to build your credit score

If you have a credit card and use it responsibly, this can help to improve your credit score. Some credit cards – known as credit builder cards – are specifically designed to help you do this.


The disadvantages of credit cards

Whilst there are various advantages to credit cards, there are also many potential pitfalls to be aware of. Here are some of the main ones:


  • Credit cards can cause you to overspend

It can be very easy to overspend when you have a credit card. Unlike a debit card, you don’t need to think about whether there is enough money in your bank to cover the cost of a purchase : all you need to do is get the card out. Even if you know you can’t really afford the item, you talk yourself into buying it in the hope you can sort everything out later.


  • Credit cards can lead you into major debt

When you get a credit card you may start off intending to repay the balance in full each month. But it’s all too easy to start repairing only part of the balance, and then interest is added to what you owe so the balance begins to creep up. Before long you could be in the position where you are not only unable to repay the balance in full, but also struggle to make the minimum repayment each month.


  • Credit card repayment problems can damage your credit score

We saw earlier that using a credit card responsibly can help to build your credit score. Unfortunately the opposite also applies. If you are having problems making credit card repayments, and especially if you miss payments or pay late, this can have an adverse effect on your credit score.


  • You may be charged credit card fees

Always check the fees you may need to pay with a credit card. Some have a monthly or annual fee, or will charge a fee if you are switching a balance from another credit card. You may also be charged extra if you withdraw cash from an ATM or use your credit card overseas. And you will definitely be charged if you miss a payment, pay late, or go over your credit limit. 


How to make your credit card work for you

As we’ve just seen, there are both advantages and disadvantages of using credit cards. You need to weigh all these up carefully to decide if a credit card would be a good option for you.

If you do decide to get a credit card, here are five tips on how to make it work for you:


  • Only spend what you can afford to pay back

Be careful about using your credit card, and don’t fall into the trap of treating it like an extended debit card. It should only be used for carefully considered purchases that you know you will soon be able to repay.


  • Set up alerts to monitor spending and repayments

Most credit card providers offer a variety of alerts by text or email that are useful in monitoring the use of your credit cards. For example, you may be able to request an alert if your balance goes over a certain amount, which can help to prevent overspending. You can get alerts when a payment is due, and also every time your card is used, so you can monitor for credit card fraud.


  • Pay more than the minimum amount

If you have got into the habit of carrying a credit card balance from month to month, and only repay the minimum amount, you are likely to see your balance increase with interest charges. In fact, you can get into the situation where your monthly minimum repayment only covers the increasing interest and your balance doesn’t decrease at all. So always try to pay more than the minimum amount to prevent falling into debt.  


  • Set up a direct debit

It’s a good idea to set up a direct debit to cover your monthly repayment, as this means you won’t forget one- which can quickly impact your credit score. Keep the amount of the repayment under careful review, always paying more than the minimum amount for reasons we have just seen.


  • Rewards : use them or lose them

If your credit card has any kind of reward – such as cashback, loyalty points, vouchers, air miles etc – make sure that you are making full use of these. You may have to pay an annual or monthly charge for this type of card and if you’re not using the rewards it’s not really worth it : switch your balance to another card that is cheaper.


What to do if you get into debt with your credit card

As we have already seen, it is all too easy to get into debt with credit card spending. If this happens to you, here are three things that you can do to get out of it:


  • Stop using your card

Easier said than done, we know! But the first step in taking control of your credit card debt is to ensure that it doesn’t keep mounting up. Some people decide to cut up their credit cards, but a less radical solution is to ask someone you trust to keep it for you and only let you have it back either if there is a genuine emergency or you have managed to get on top of your credit card balance again.


  • Ensure you pay at least the minimum amount every month

It’s essential that you keep up your credit card repayments, even if for now this is only the minimum payment each month. But as we saw earlier, if you can manage to make more than the minimum repayment this will gradually start to reduce your balance and get things back on track again.


  • Consider a personal loan to consolidate your credit card debt

A personal loan to consolidate your credit card debt could be worth considering. The aim is not to take on more debt, but to lock in your existing debt so that it can no longer increase, and so that you know how much you need to repay and when. Payments on a personal loan are fixed and will not increase, unlike credit card repayments where the interest can keep going up and up. 

It may be possible to get a personal loan even if your credit score has been damaged by your credit card debt. For example, Loans 2 Go offers loans for bad credit. So if this may be of interest, check out our Bad Credit Loans page to see how we may be able to help.


We hope that this article has helped you to weigh up whether or not a credit card is the best thing for you, and to understand how to manage it well if you do decide to apply for one.

 For more helpful financial and lifestyle tips, visit us here again soon at Loans 2 Go.