Pros and Cons of Credit Cards – Is the Right Thing to Do? What should you look out for?

By | Last Updated: 17th September 2019 | This post may contain Affiliate Links

Are you searching for the Pros and Cons of Credit Cards in England? This superb section could be ideal for you.

Did you know, UK consumers are increasingly turning to plastic to make their purchases on a daily basis. In the second quarter of 2017, 77 million purchases were made on cards than in the first three months of 2017. (Source – BBC )

Equally, in that second quarter we spent £110 million more than compared to the first quarter! As you can see, credit cards are increasingly becoming used for everyday items as well as for high ticket purchases.

Let’s take a look at the pros and cons of purchasing on a credit card in the United Kingdom.

The Advantages:

Of course, this section is not exhausted, you can find other great articles, guides and information across this entire website. Please keep scrolling or click on a link which takes your fancy.

Extra Protection – With ‘most’ providers, you’ll find that you get more protection when purchasing with a credit card. Of course, there are exceptions to this rule, so it’s always advised to read all of your cards documentation and terms and conditions before using. However generally you get more protection with a credit card than if you paid with a debit card, cheque or physical cash. This is stated under the Consumer Credit Act, Section 75.

This extra level of protection is to ‘guard’ against companies going bust and consumers not being able to obtain a refund. For example, let’s say you purchase a holiday on a credit card for £10,000, and the travel agency goes bust, you can then claim your money back from the credit card provider. Equally as well as this protection, a credit card can also offer safety if it’s used fraudulently too.

Speed – With the closure of banks and building societies across the UK, accessing physical money can be much more challenging. Using a piece of plastic from inside of your wallet or purse can be much easier for most people. After all, why spend your hard-earned cash on a large transaction when you can ‘spread the payment’ more easily with a card? This can be great if you have a 0% APR credit card or like to ‘squash’ the balance each month. It’s always recommended to pay off the balance in full at the end of the interest-free period to avoid any additional charges.

Easy Transfers – 0% Balance Transfer Cards are becoming more popular throughout the UK. Typically, people use these cards to ‘switch’ older credit and store cards with higher interest rates to a new card with a lower interest amount. Some store cards can charge interest of 20% or more, so switching credit cards should be seriously considered for most.

Please be aware that most card providers will require a ‘transfer fee’ to be paid, this can vary depending on each individual company, however it’s usually around 3-4%. This charge is ‘normally’ worth paying as it’s usually lower than any interest you’re already being charged on the higher APR cards. Disclaimer: Please remember to read all documentation and terms and conditions before transferring any balances. Equally you need to think about your own individual circumstances and your budgets to see if transferring is correct for your situation.

Rewards and Cashback – Some providers will offer ‘cashback credit cards’ or ‘rewards’ to customers who spend on their cards frequently. These incentives can range depending on the card provider, however people can earn points towards air miles, free holidays and more! Typically, these types of cards are only ‘worth it’ if you pay your balance off in full at the end of each month. Otherwise the interest which will be added to your balance will generally ‘outweigh’ the value of the rewards.

Accessibility – It’s never been easier to apply for credit, with hundreds of companies offering great deals and incentives there’s certainly a huge choice. From high street banks to building society’s and dedicated providers.

The Disadvantages:

Penalty Charges – If you miss a monthly payment, make a late payment or exceed your agreed credit limit, you will generally have to pay a penalty charge. This fee is set by your card provider and can vary from company to company.

Hidden Costs – As well as penalty charges their can be other hidden costs too, this can range from change of address, to balance transfer fees and more. Typically, ‘most’ cards will charge a fee to withdraw money from a cash machine too. This tends to be around 2%, however it can be higher and normally the interest starts immediately as there is no interest-free period on cash withdrawals. As each company has different policies you need to read all of the terms and conditions and documentation before agreeing to a credit card.

Temptation – If you’re browsing in your local shopping centre and see something you like, it’s quite easy to take a piece of plastic out of your pocket and pay. After all, in some cases it doesn’t feel like ‘real money’ is exchanging hands. Arguably one of the biggest drawbacks of credit cards is their easy temptation to lure people into spending money they don’t have or can afford. Ultimately this is down to your own self-discipline to control your spending habits and keep a sharp eye on your budget.

Debt – Generally it’s always recommended to ‘clear’ your card balance at the end of each month. Remember that having a credit card if a form of borrowing and sometimes (depending on the interest rate) your balance can quickly balloon leaving you in debt. It can be easy for things to spiral out of control if you don’t have a handle on your spending habits. The general advice is to always attempt to ‘pay more’ than the monthly minimum which is required. You should also only think of a credit card as a ‘short-term’ borrowing facility rather than long-term.