Do you Need a Credit Card?
You don’t essentially need a credit card. But in this day and age there are reasons such as convenience, purchase protection, rewards and cash back that can make using one easier to pay your way.
More from Choosing a Credit Card
6 January 2009
Do You Need a Credit Card?
With more than 1,500 cards on the market the UK has one of the most competitive credit card markets in the world.”
Flexible choice
According to APACS, the UK Payments Association, the average number of credit cards per person was 2.4 credit cards in 2007.
Spending on plastic cards in the UK amounted to £354.2 billion in 2007, with £133.2 billion spent on credit and charge cards.
In today’s fast moving society it is still possible to get around without a credit card. But credit cards are a convenient way to pays for goods and can offer extra consumer protection that other forms of payment can't.
With more than 1,500 cards on the market the UK has one of the most competitive credit card markets in the world. It can take time to look around for the right card, but if you find one that suits your needs you can make it work in your favour.
Build your credit rating.
If you use your credit card responsibly you will be able to build up a good credit rating, which will work favourably for you when applying for other financial products. If you want a card to use for your expenses and pay it off each month, consider the various cash back cards on the market, which effectively give you money for spending.
Shop online, over the phone or by mail order.
Using a credit card can make all of these ways of shopping possible. Of course, you can do these equally as well with a debit card.
But did you know:
If you use your credit card rather than a different form of payment this will give you extra consumer protection. Under section 75 of the Consumer Credit Act if you pay for items from £100 up to £30,000 both the card issuer and the trader have responsibility under a rule called equal liability. If anything goes wrong such as the goods are damaged or the company goes into liquidation, you will have protection from both parties.
This is why many people book flights or a package holiday on their credit card and then pay it off immediately after making the transaction. This consumer protection does not apply if you pay by cash or debit card.
Using a credit card, this protection also applies if you part pay for something.
The same rights are also applicable to goods brought overseas using your credit card. This also includes buying goods for delivery to the UK from overseas by telephone, mail order or over the Internet.
Disability.
For those people who may have difficulty with PIN there is an option to get a chip and signature credit card. For anyone who does not have difficulty but may have other impairments, the industry has worked to make the process of paying with a chip and PIN card easier. Your credit card company will discuss the options with you.
Emergency situations.
There may be times when you need extra funds and then your credit card can be a lifesaver. If this happens, make sure that you budget for the unexpected expense afterwards, even if it takes a few months to pay it back.
Cashback.
The way to make this really work is to put as many of your allocated monthly purchases as possible on the card and repay the balance in full every month. The more you spend, the bigger your reward. You effectively make money by spending it. But if you can’t make the payments, it is better to look at another option.
Rewards.
The majority of credit card companies offer cards with loyalty or reward schemes such as AirMiles or travel points. If you collect enough you can get a free flight or cruise and although these cards don’t earn you cash, they can save you the money you would have spent on travel. If you pay your card off in full you can really make the rewards schemes work for you.
0% on purchase cards.
These can be useful if you want to make a large purchase and spread the payments over time without racking up interest. The cost effective way to do this is to ensure that you pay for the purchase within the 0% offer period otherwise the item will cost more than you originally bought it for, in interest payments.
Price protection.
Check the small print of your credit card to see if it includes price protection. This means that if you make a purchase at one price and it becomes cheaper in a sale or a special discounted period, you may be able to claim back the difference. A time limit of 60 days from your original purchase usually applies and generally covers amounts from £10 to £1,000.
A real global currency.
Credit cards are accepted all over the world and are a very convenient way to do your spending.
Protection against fraud.
You are liable for fraudulent spending that anyone does on your card to a maximum £50, if the card is lost or stolen. This beats carrying wodges of cash around, which will leave you well and truly out of pocket if stolen.
