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Tuesday, 4 March 2014

The Top Ten Reasons For Choosing a Credit Card

Why You Really Should…

…and Why You Actually Do
For Online Shopping
It is a little-known fact that you actually have MORE rights as a consumer when you buy online. If you buy in-store you only have the right to return goods if they are faulty.  Buy online and, under the distance-selling regs, you have the right to return goods for a full refund, even if they are not faulty.

For Online Shopping
Such is the allure of surfing the net and buying goods at the click of a mouse, all from the comfort of your own home, that many people admit to getting a credit card solely to enable them to participate in this spending extravaganza.  For some people it is all just TOO easy, and the temptation to forget the budget and overspend is irresistible.

Protecting Your Purchases
Buying goods or services on your credit card gives you extra legal protection compared with paying by cash or cheque. Under Section 75 of the Consumer Credit Act if you have a problem with your purchase you can claim back your money from the card issuer, even if the company who sold you the goods goes bust.
For Free Insurance
That extra peace of mind that comes courtesy of Section 75 on the Consumer Credit Act is great, but don't assume that EVERYTHING that comes with your card is free, let alone right for you. Until recently, card and identity theft protection insurance were routinely marketed to card customers, and thousands of consumers were mis-sold this unnecessary product.
To Pay off Debt with a Balance Transfer
Shifting debt from a high-interest rate to a 0% or low-rate balance transfer deal is a great idea, but YOU MUST MAKE SURE YOU PAY OFF THE DEBT BEFORE THE CHEAP RATE ON THE NEW CARD ENDS!  Otherwise you will probably find the interest rate sky-rockets to over 15% APR interest. If you really cannot manage to pay off the debt; shift it again to another card!

To Pay off Debt with a Balance Transfer
That’s right; we rack up debt on one card, and then take out another one to shift the debt and get the card provider off our back. Until we stack up another pile of debts on the new card, that is…

Book your flight and holiday on your card and you are protected in the event of the travel company going bust, or having to cancel your holiday.  Some card issuers will also offer travel insurance as part of the package. Think twice before using your card while you are abroad though as you may be stung with foreign commission fees and charges. Look for a credit card specifically designed for overseas spending: there are a few on the market which don’t charge             commission fees or for overseas ATM withdrawals.  Another option would be to go for a prepaid card instead.

To Buy a Holiday
Your friends are all signing up for expensive foreign holidays, and though you can’t really afford it, you don’t want to be the odd one out.  So you bung it on your credit card.  Not recommended.

Building Credit History
At some point in your life you will certainly need to access serious amounts of credit, say to buy a house or a car. Lenders use your credit history, also known as your credit profile, as a way of judging how you will handle credit in the future – essentially they want to be as certain as possible you will handle credit, and your repayments, responsibly. If you have a poor credit history and a poor credit rating, or have never used credit and therefore have no credit history, then your options are going to be severely restricted.

To Make a Major Purchase
You can’t afford it, you don’t have the cash in your current account and you can’t be bothered to arrange finance for that must-have item, so you get a card and stick all the debt on there. Well you can’t rock up at a fancy car showroom with a wad of banknotes now, can you? 
What you SHOULD be doing (see left hand column) is building a good credit history so that you have access to a good credit deal when you really need it. Or you could just save up...

Not only does a card provide a useful source of funds when you are faced with an unexpected expense, but it can help in other ways too.
Many card issuers include additional insurance cover, including travel insurance, medical emergency cover  and ID fraud protection.
They are indeed useful for emergencies and unforeseen expenses, but many of you keep a credit card solely for this purpose and may be missing out on some good deals and benefits.  Don’t forget that using a credit card for cash withdrawal whilst travelling abroad should only be used as a last resort, as it will incur fees.

A tempting offer: spend on your credit card and get rewarded with all sorts of goodies including cash back, air-miles, discounts, and Nectar points.  We all like to get something for nothing, but don’t forget that the rewards are offered to encourage you to spend.  Get drawn into spending more than you can afford on a rewards card and you may be hit with high interest rates.  Be sensible, pick a card that offers the right reward for you, and always make sure you pay it off in full at the end of the month.

When you apply for a card with a tempting one-off introductory offer, make sure that you DO actually get the bargain deal you are after.  Remember that the card issuer will carry out a credit check on you, and usually it is only the customers with the best credit scores who will be eligible for the best deals. Sometimes you will be accepted for the card, but NOT with the headline offer.

It is important to have access to a credit and/or debit card for use in unforeseen emergencies.  Consider also that there are going to times when you will not be able to pay by cash, for example, on some transport systems.
They are undeniably flexible, but make sure you are using your plastic appropriately.  With a plastic card in your wallet you are always in a position to pay for most types of purchase, but sometimes you really should stop and consider the best way to handle a major purchase.

Budgeting and Expense Tracking
I know, I know, this is boring old-fashioned commonsense, but we all need to face up to reality at some point and sort out our personal finances.  A credit card can help with this as it will automatically give you a clear monthly record of all your spending.

Reluctance to Embrace New Technology
Using credit and debit cards is one way to avoid the security risks that come with carrying large amounts of cash, but do not assume that they are the ONLY alternative.  Lots of new options are now available, and some of them may suit you better than a plastic card.  Look at PayPay, or payment via smart phone, for example.

Because You Did Your Research and Found the Best Deal 
Congratulations, you are a savvy customer. Don’t feel too smug though: times change, deals come and go, and the card you signed up for three years ago may no longer offer you the best deal. 
Because You were Offered One by Your Bank and it was Easy to Apply
 It sounds too simple and obvious to be true, but most of us just say 'yes' to whatever card deal our current account provider offers us.


  1. A very helpful guide - especially as it highlights areas where we can often be 'lazy' around managing our finances - thank you for reminding me!

  2. It's a pleasure; thanks for visiting the blog and for taking the trouble to give some feedback.