The benefits of using credit cards
Published 23/11/2011 | 17:10
The British Government are currently encouraging people to pay off their debts and restrict their credit spending, so it seems a little ironic that in the last twelve months government credit cards have been used to purchase items such as doughnuts, flying lessons and songs from iTunes.
If the Government can spend money on purchasing items using credit, why shouldn't the general public? The reality of the matter is that using credit cards to purchase items has a number of benefits that many people may not be aware of.
With the threat of a double dip recession looming and the economic downturn hitting the general public hard, credit cards provide an affordable way to purchase those essential items, as well as treating yourself or a loved one.
There are a number of things that should be taken into account when purchasing items with credit cards. The most important of these is to make sure that the repayments can be afforded, and that interest payments are taken into account when deciding what to purchase, and how much to spend. If the books balance, and the repayments are affordable, then the convenience of purchasing goods and services with a credit card makes perfect sense.
One benefit of paying with a credit card is the protection that the purchase provides you with. If a company goes into liquidation after you have purchased items and you do not receive the goods in question, customers are protected up to the value of £30,000 under the 1974 Consumer Credit Act. Credit card protection can also provide additional security from fraudulent transactions.
Your credit history is vital when it comes to purchasing more expensive items or obtaining a mortgage, and the best way to make sure that you have a good credit history is to have credit in the first place. If you have a credit card and are regular and up to date with repayments, then this will enhance the chances of obtaining a mortgage as it shows prospective lenders that you are reliable and have a good history of paying off debts incurred. Mortgage lenders are more likely to lend to people who have a good credit history then those who have no history of credit at all.
There are also a number of incentives available to people applying for credit cards, including cash-back on purchases and free travel insurance. Cash-back is a particularly attractive benefit of having a credit card, as some companies offer up to 1.25 per cent of the amount spent as a cash payment into the account in question. Some credit card providers offer travel insurance and although these cards normally have an annual fee attached to them; money can still be saved in the long term. Credit cards are also protected if lost or stolen while people are holidaying abroad, and emergency replacement cards or readily available cash give people peace of mind when away from home.
Most credit card providers offer interest-free periods on purchases, and this can be helpful when making an impulsive purchase, as long as the payments are made before the interest free period expires (this period is usually no longer than two months). Additional cardholders can be added to most credit cards, and this is a useful way of allowing different family members to share the credit on a particular card, meaning that they are able to make purchases when they feel it is necessary.
The numerous benefits of using credit cards far outweigh the disadvantages and as long as you are sensible with your spending and don't over