[Photo: Rex Features]
Either you’re a card-tart up to your eyeballs in every Visa, Mastercard and AmEx on the market, or you’re convinced getting even one will lead you to rack and ruin.
If you’re the latter, you may think you’re being sensible, but actually you’re missing out on some serious benefits. Your purchases might not be as well protected as they could be, and your money might not be doing as much for you as you’d like to think.
So now is the time. All you have to do is set up a direct debit so you don’t forget to pay it off each month. Here are seven ways you could benefit from a credit card:
1. Credit cards build your credit rating
This is the big one, because your credit rating will affect your ability to borrow in the future on everything from car loans to your mortgage.
It’s a bit of a Catch-22. If you’ve never been in debt, lenders don’t know what your ability to pay back is like, so they’re less likely to want to lend to you. If you’ve been paying the minimum back on all your credit cards for years, they’ll love the look at you, because you’ll also have been paying interest.
The key of course is to get the credit card and show you’re a responsible borrower by never missing a payment. Ideally, paying the entire amount off each month so you don’t get into debt.
You can get your credit score online at Experian (remember to cancel after your one-month trial) or Noddle.
2. Get rewarded for your spending
You might have noticed there are loads of credit card options out there, and they all want your business (ahem, debt). So there are lots of rewards and offers you can collect to make sure you get the most out of your new card.
Spend a while comparing things like cashback on purchases, airmiles, shop loyalty points, discounts and travel insurance.
And keep an eye on your deals as you’ll be offered cashback on different shops and services at different times. But don’t be tempted to spend money on something you wouldn’t have anyway, just to get a little cash back - that’s what the bank wants you to do.
3. Section 75 protection
This part of the Consumer Credit Act of 1974 gives you the right to a refund if you suffer from a breach of contract or a misrepresentation of goods. This means your credit card issuer shares the responsibility for the goods with the retailer so you’re more likely to get your money back. Something that’s not always available with debit cards or cash.
4. Interest-free borrowing
Eh up, this sounds a bit scary. But clever debt management on a small level doesn’t have to be dangerous or terrifying.
If you want to buy something slightly more expensive than you can afford, but know you could pay it off a little each month, instead of paying interest, get a 0% credit card out instead, buy your goods on it and then make sure you pay it back during the 0% period (which can be anything from three months to two years).
Things only get dicey if you buy a ton of stuff on you card and then pay the minimum back each month, leaving you with a whacking great bill a year down the line (especially as the card will probably go up to at least 17% interest at that point).
Clever ‘card-tarting’ means you can move your balance to another 0% card to give yourself more time to pay. This usually comes with a fee of around 2 or 3% - which is often worth it.
Just make sure you stay on top of when your 0% periods are running out and keep up your payments.
5. Access to emergency money
Your company has messed up its billing, your client forgot to pay, or you’re just short on money before payday - everyone sometimes needs a grace period and if you need to buy your groceries, a credit card can help you bridge that gap.
Again, it’s all about not going overboard - only spend what you know you’ll be able to pay back within a reasonable amount of time to avoid high interest charges.
6. Peace of mind
If you lose your wallet, or it’s stolen, your card issuer will cap your liability at around £50 (most even waive this), as long as you report it missing asap. That means, even if someone buys a laptop with your card, you won’t be liable for the cost.
7. For times when it’s the only way to pay
Particularly when travelling, credit can sometimes be the only way to pay. If banks are closed, cash machines aren’t working, or if your debit card doesn’t seem to be behaving abroad, credit cards come to the rescue as they’re internationally recognised.
OK, a few paper dollars might be more use in a shack in the wilds of Thailand, but for the most part, a Visa or Mastercard sign will be your saviour.
Go forth and apply!
Credit cards CAN cause you rack and ruin, if you misuse them. But used in the right way, they can be hugely beneficial and actually very lucrative. Just make sure you don’t fall into the old trap of over-spending and not being able to pay back. That’s no way to up your credit rating.