Credit cards are a flexible tool for purchasing things and borrowing money when needed. The limit for borrowing is predefined and the card holder cannot cross it. If crossed, one needs to pay extra interest on the money borrowed above that limit. With all the features and restrictions, it’s still a big success in the UK. Statistics by the FCA suggests that there are more than 30 million credit card holders in the UK. The cards offer varied benefits which allure people towards buying them. Find the advantages and how credit cards work in brief here.
Basic features and advantages of credit cards:
Easy Cash back: Most of the credit card companies return a percentage of your spending as tax free cash and will credit that to your account annually. This way you make some good savings by using credit cards. However, you need to be careful as this will help in savings only if you fully pay the monthly credit card bill. Otherwise, the higher interest will outweigh any savings done by cash backs.
Payment protection: With credit cards, one has the facility to secure goods purchased or payment made. Under section 75 of the Consumer Credit Act, if you buy anything with a credit card and pay between £100 and £30,000 then you get a valuable protection in case the goods are damaged or if the seller goes bust. If the money paid is less than £100 or more than £30,000 then you can make a claim under the chargeback system which results in getting you full or part payment of the amount paid by you. So, with credit cards your purchases are more secure than any other mode of purchase.
Rewards and discounts: Many retailers, stores, airline brands and other companies offer discounts when the purchase of their goods is made by credit card. They offer slashed prices through discounts and give rewards in terms of points and vouchers. This makes way for some good savings which you do not get with debit cards or direct cash payments.
Overseas spending made affordable: Credit cards are more affordable than debit cards while travelling abroad. Most debit cards charge foreign loading fees when you make payment for goods bought abroad. This is also the case with credit cards, but most of the companies waive off this fee and give you relaxed purchasing on your foreign trips.
Protection against fraud: In case of loss or theft of your credit card, you can stop payments done through the card. Just a phone call to the bank and things will be under control. In worst cases when someone tries to use your card and gets successful in paying your hard earned money, then your bank will be reimbursing all your losses. Fraudulent payments are refunded unless the bank has a strong reason and proof to refuse a refund.
When not to use credit cards?
Credit cards may turn out to be a costly bet in the following situations:
Buying foreign currency: If you buy foreign exchange, vouchers and gift cards through your credit card then you are likely to pay a cash advance fee, higher APR and also not get an interest free period. This holds true even if you pay your full monthly bill and that too on time. So, avoid buying the listed stuff through your card.
Cash withdrawals: You should not withdraw cash through your credit card else you would be charged with withdrawal fee and high APR. This also leaves a bad image on your credit report.
Pay through credit card cheques: If you pay through credit card cheques then you need to pay fees for that. Also, section 75 cover does not apply to this and so, your transaction is not secure.
With so many advantages and safety measures for your money, it is a wise decision to use credit cards. You may need to shop around and find the best credit card company in the UK. For this, use comparison services from FreePriceCompare.com. You can also call us on 02034757476.