Many people today have a credit card, with an estimated
30 million of us carrying a credit card – and we’re certainly
using them, in 2003 the total for transactions was in excess of £100
billion. Credit cards are certainly big business, and there is a wealth
of companies out there competing for your custom.
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A credit card offers a convenient way to pay for your purchases, without
the need to carry cash around with you, and with almost all retailers
in the UK accepting payment by credit cards you can use your plastic pretty
much anywhere. As well as making paying for your purchases simpler, credit
cards give you the ability to make purchases without having the cleared
funds in your account. Unlike debit cards, which take the money straight
out of your current account, with a credit card the card company effectively
pays the supplier and you then pay back the credit card company. This
can be very useful for a number of reasons, as discussed below.
The first benefit of this approach is that if you need to make a purchase
but do not have enough money to cover it at the time, you will be able
to buy the item with your credit card, and then pay off the amount at
a later date when you have the money. You need to be aware that the timescale
in which you pay off the debt to the card company is important to how
much you pay. If the debt is cleared within a month of the purchase then
typically there will be no charge at all, however after this period you
will be charged interest on the amount – these rates are high compared
to other types of loan, and you must be aware that the costs can mount
up easily.
The second main benefit of using credit cards is the protection that they
offer to the consumer, as the transactions are covered by the consumer
credit act. Section 75 of this act states that consumers have the right
to get their money back from the credit card company if they purchase
goods using the credit card which turn out to be faulty. You should be
aware that this only applies to purchases between £100 and £30,000,
anything outside this range and the cover will not apply. This can be
especially good for peace of mind for consumers who shop over the internet,
as the remoteness of the seller can sometimes raise concerns over dealing
with products that are delivered in a faulty condition.
Certain credit card companies offer additional protection on purchases,
such as extended warranties or fraud guarantees whereby you will not be
liable for any costs if your credit card is used fraudulently. Many of
the card companies offer extra incentives with their cards, such as reward
point schemes and special discounts when using their credit card at shops
that the card company has partnered with.
Credit cards can be great for convenience, but they should not be seen
as a way of gaining long term finance as they offer high levels of interest
charges, but used sensibly a credit card can give you greater financial
flexibility and benefits of protection that cash cannot provide. For the
best credit cards see our list of the top
credit card providers.
For a more extensive array of loan
offers alongside mortgage offers, take a look at Loans UK
for all your loan needs.
