Credit cards certainly have their uses. There is no more convenient form of payment for shopping online, spending abroad or for big purchases.
If you spend more than £100 on a credit card you may be protected by the Consumer Credit Act. This means that if you have a claim against the retailer you may also have a claim against the credit card company. This can protect you against online scams or faulty goods.
However you should use caution when shopping online, even with a credit card. Never email your details to anyone or give out credit card passwords. Look for websites that use secure payment methods. If in doubt, don’t use that website.
Most of us like to travel and the convenience of being able to use our credit cards almost anywhere in the world can be very attractive. But overseas spending on your credit card can leave you open to some nasty charges.
For example, most credit cards add a foreign exchange ‘load’ fee to your purchases. This can be as much as 2.75% of the total cost added to your bill. There may well also be a foreign currency ‘commission’ credit card charge added to the cost of the transaction, this can be as much as 3%.
If you withdraw money from an ATM using your card then you will be hit with a very high rate of credit card interest, often as high as 23% APR. Some credit cards will charge you this interest even if you pay your balance off in full at the end of the month. Avoid cash advances wherever possible and watch the small print.
The credit card really comes into its own when you want to make a big purchase. There’s no cheaper way to spread your payments – if you choose the right credit card! Use a dedicated new purchases credit card that has a special 0% interest introductory offer on new purchases for any major spending. Play your credit cards right and you can pay no credit card interest at all.
