Credit cards can be a great tool to help you manage your money and can offer plenty of advantages if you use them in the right way.
Credit cards can offer a convenient way of paying for everyday expenses, as well as providing you with some unique advantages over other payment methods.
Using a credit card responsibly can help you to earn rewards, finance a large purchase and boost your credit rating.
Read on to discover how to get the most from your credit card and whether it’s the right option for you.
There are plenty of options you can choose from, with a range of cards available to suit different needs.
You might be looking to earn rewards as you spend, spread out the cost of a big purchase, transfer existing debts to a lower interest rate, or build up your credit history.
So, when you’re choosing your card it’s important to consider what you need it for.
Make sure you shop around for the best deal, check what fees or charges might be involved and work out what repayments you would be able to afford.
Some credit cards come with an introductory interest-free period on credit card purchases or on balance transfers.
This period typically lasts between three months and two years but varies greatly depending on the card and provider, so it’s worth comparing.
A 0% interest deal can be the ideal solution if you want to make a big purchase and spread the cost over several months.
You’ll need to pay off the balance before the promotional period ends. If you don’t, you’ll be charged interest on the debt and will end up paying back more than you spent.
It’s also worth noting that if you fail to make your repayments on time or go over your credit limit, you may lose your interest-free promotional period.
A big advantage of using a credit card is the purchase protection you’ll receive.
This protects purchases you make on goods or services that cost between £100 and £30,000.
Under Section 75 of the Consumer Credit Act, you’ll be able to claim money back from the credit card provider if there’s a problem with the items or services you’ve bought, or if the company you’ve purchased them from goes bust.
Many providers offer reward cards which can help you earn cashback or bonuses like vouchers, air miles or money off future purchases.
By using these cards for your everyday spending, you can earn rewards for spending money on the things you’d usually buy.
Choose a card that provides rewards you can really benefit from - if you pay off your balance in full every month, you could earn hundreds of pounds in bonuses each year.
However, some of these cards come with fees so check the benefits are worth it first.
You can use most credit cards for contactless payments, and you’ll have the same 100% fraud protection that you do with normal chip and pin transactions.
You can also add your credit card to your mobile phone or smartwatch, so you can make contactless payments on the go.
Check for the contactless symbol (it looks like a wi-fi signal on its side) on the front or back of your card to see whether your credit card can make contactless payments
By using your card sensibly and making your payments on time you can show lenders you’re a responsible borrower.
Using a credit card like this can help you to improve your credit score.
If you have a poor credit history or don’t have one at all, you may be able to use a credit builder credit card to boost your rating.
The golden rule to making the most of your credit card is to keep up with your payments. This means you won’t risk being charged late payment fees or losing your interest-free period.
Arranging a direct debit can help make sure you don’t miss a payment.
You can set it up to pay the minimum repayment each month, a fixed amount, or the full balance.
If your income varies from month to month, you can pay manually instead. To remind you when payments are due, you can normally sign up for free text or email alerts from your provider.
If you already have existing debt on other credit cards, you could transfer it onto a new credit card with a lower interest rate by doing a balance transfer.
Most balance transfers come with a 0% interest rate for an introductory period.
Depending on the card, this interest-free period could be up to two years.
This gives you an opportunity to reduce the overall interest you need to pay on your debt, which may help you pay off the balance sooner.
Typically, you’ll be charged a percentage of the amount of debt you’re moving as a balance transfer fee.
You might not meet the eligibility criteria for certain cards and if you apply and are rejected it can make it harder to be accepted for one in the future.
To help give you the best chance of success when you’re applying for a credit card you can use our smart search.
This shows you the cards you’re more likely to be accepted for without affecting your credit rating, so you’ll have all the information you need before you apply.
Each of these is a way of managing your money but they work very differently to each other, and which is best will depend on your needs:
When you use a debit card to make a payment or withdraw cash, the money is automatically taken from your bank account and you won’t be charged interest to use it.
Because the money comes out of your account straight away, it’s best to use debit cards for everyday small spending that you’ve budgeted for.
Credit cards provide flexible borrowing up to a predetermined limit and can offer 0% interest options, while also providing more protection on purchases than using a debit card.
With a credit card, every time you use it, you’re borrowing money from the card provider that you’ll need to repay later.
While you can earn rewards with a credit card, you may be charged interest if you don’t pay off the balance in full each month and you could incur fees for missed or late payments.
Unlike a debit card, if you withdraw money using a credit card, you’ll be charged a fee.
Personal loans are typically used to pay for a big purchase upfront where a credit card limit may not be high enough.
Whereas credit cards offer flexible borrowing that can increase as you spend, a loan gives you a single cash lump sum that’s paid into your bank account.
You’ll pay interest on the full loan from the start and agree to fixed repayment amounts over a set period - so it’s clear how much you’ll need to pay each month.
You can sometimes pay off a loan early, but you may be charged an early repayment fee.