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Credit cards have long been a polarising, and often misunderstood, topic in personal finance. Perhaps your parents warned you against taking out a credit card, for fear of establishing negative spending habits and getting into debt. But the reality? There are lots of advantages to using a credit card, and with safe use, they can become a great asset in helping to manage your finances. In some situations, you may even find there is more benefit to using a credit card than a debit card. In collaboration with MoneySuperMarket, we will review the advantages of credit cards, and where you can find the best card for you.
What are the advantages of credit cards?
There are lots of benefits to credit cards, check out this list of advantages and take a moment to decide whether a credit card could be the right move to help you to manage your finances.
They can help you build your credit rating
When you have a credit card and pay your bills on time, it helps to build a credit history. If you also keep your credit utilisation low, and pay off your balance in full each month, this helps to contribute to an overall ‘good’ credit score.
They can provide rewards
Some credit card providers offer benefits such as air miles and cashback on your shopping. Other providers offer vouchers and sign up bonuses.
Credit cards that reward you with air miles can be particularly helpful if you travel frequently. Personally, I’ve been able to collect a number of air miles through my credit card provider which is going to seriously help with the cost of honeymoon travel next year.
They provide enhanced protection when making payments over £100 online
When you use a credit card for purchases between £100-30,000, you are protected by section 75 of the consumer credit act. This means if you book a flight with an airline using your credit card (over the value of £100), and the airline goes bust, you can make a claim against your credit card company to get your money back.
You do not get this same protection with a debit card, so using a credit card for large purchases (particularly for travel bookings such as hotel and flights), can be a benefit.
You can’t book hire cars without credit cards
I learned this the hard way. On a holiday in San Francisco I got stuck at an airport, unable to hire the car I had booked as I didn’t have a credit card in my name. We lost a day of our holiday and as soon as we got back to the UK I got a credit card! Luckily another hire car firm allowed us to hire a car using my partner’s credit card instead, but it is not a day I wish to repeat.
I wish I had known that you needed a credit card for car hire before we took the trip! Even if you never use your credit card for day to day purchases, it is worth having a credit card in your wallet, just for this purpose alone.
After reviewing the advantages of credit cards, if you’d like to consider applying for a credit card, it’s important to evaluate the different types of credit cards which are available, and choose the right card for you. You can do this with ease with the help of MoneySuperMarket.