At a glance

  • There are pros and cons associated with using credit cards. Understanding how to get the best out of them is essential
  • Used sensibly, credit cards can offer protection, flexibility and security
  • Making card repayments is key. Failing to keep on top of them can result in debts piling up quickly
  • A good credit rating can help you get the best deals and improve your position when it comes to other products and services

At a glance

  • There are pros and cons associated with using credit cards. Understanding how to get the best out of them is essential
  • Used sensibly, credit cards can offer protection, flexibility and security
  • Making card repayments is key. Failing to keep on top of them can result in debts piling up quickly
  • A good credit rating can help you get the best deals and improve your position when it comes to other products and services

At a glance

  • There are pros and cons associated with using credit cards. Understanding how to get the best out of them is essential
  • Used sensibly, credit cards can offer protection, flexibility and security
  • Making card repayments is key. Failing to keep on top of them can result in debts piling up quickly
  • A good credit rating can help you get the best deals and improve your position when it comes to other products and services

There’s little doubt that credit cards are something of a double-edged sword. For all the advantages, such as helping you to manage your money and spread out costs, they can also cause a lot of problems. It’s important to understand how to get the best out of them while also avoiding the pitfalls along the way.

Here’s what you need to know about credit cards to get all of the benefits and none of the downsides.

The good

Credit cards offer several benefits. For example, they allow you to spread the cost of large payments across a period of time. They can cover important bills when cash is running low and enable you to pay for longer-term outlays (such as holidays) without eating too much into your day-to-day income. They also come with purchase protection, which means you can reclaim the cost of purchases between £100 and £30,000 in the event of the supplier going bust or the product going missing, for example.

Credit cards provide a flexibility that can be useful for managing your money, too, particularly if your income is up and down. A good record of repaying debts can also help to improve your all-important credit rating.

The not so good

If you keep on top of your repayments, credit cards generally work well. But once you fall behind on your monthly repayments, the interest charges can mount up quickly and more fees might be levied, leaving you with rising debts and damaging your credit score in the process. Watch out for other fees, too, such as charges for cash withdrawals and overseas use.

Understand the cost

This is crucial, because it can be easy to lose track. Credit cards charge an annual percentage rate, referred to as the APR. This covers the interest rates and relevant fees that are included in the cost of using your card. It is the figure to use when comparing different options. If you spend £200 on your credit card and the APR is 10%, for example, you’ll need to repay £220.

APRs vary widely. Some come with 0% interest-free periods before jumping to much more expensive rates when the 0% period ends. Others charge up to 50%, with the highest rates for those with poor credit records (for example, their credit history suggests they may not repay on time).

Once you’ve applied for a card, the provider will quote you a personal APR. This might be the same as the advertised APR, but certain factors could make it higher or lower, such as your age, employment status and income.

Keep an eye on your score

The biggest influence on your personal APR is likely to be your credit score or rating. This is a record of your previous credit repayments, including household bills as well as bank products. If you’ve always repaid on time, you’re much more likely to have a good credit score and be offered a good rate.

A record of late repayments, or failing to make them at all, will have a detrimental impact on your credit history. A poor credit score means your personal APR might be higher than the rate advertised, and your application could even be rejected.

Those without any repayment history, such as young adults, can also be charged higher personal APRs.

You can view your credit record through companies such as Experian and Equifax. Make sure you check for errors and ask the company to correct any that you spot.

Other pitfalls to watch for

It’s worth being aware that cards with 0% interest periods – where you can borrow for free – can quickly become more expensive if you fail to clear the card when the interest-free period ends.

Similarly, balance transfer cards allow you to move your debts around and keep interest payments down. But those transfers trigger fees, and they can be much more expensive for purchases than other credit cards.

Avoid the temptation to spend across a number of different cards. They can be easy to take out, but keeping track of them and repaying them all on time is much harder, leaving you at risk of getting into debt and damaging your credit score.

It’s also worth trying to make more than the minimum monthly payment. These can be low, but they also mean the repayments can be spread across a long period of time. The quicker you can clear it, the better for your credit rating.

Keep your options open

Bank overdrafts are perhaps the most obvious borrowing alternative, particularly if you need to borrow a certain amount for a certain period of time. Banks can no longer charge more for unarranged overdrafts than for arranged ones, under rules that took effect in April 2020, but some have responded by increasing charges for all overdrafts, so it’s vital to compare them properly.

Personal loans can be useful for one-off borrowing, and some are cheaper than credit cards, provided you repay on time. Loans typically have fixed or variable charges, and it’s important to know how the one you opt for affects your repayments.

Short-term loans, often referred to as payday loans, also have their place if you need to cover one-off expenses, especially if you don’t qualify for a competitive credit card or loan rate. But the charges can rise dramatically if they aren’t repaid on time, and the debts can quickly run out of control.

Other alternatives include prepayment cards, where you have to put money on the card before spending on it. They are a useful option if you are excluded from mainstream banking, are trying to repair a bad credit record or need help managing your spending.

There’s little doubt that credit cards are something of a double-edged sword. For all the advantages, such as helping you to manage your money and spread out costs, they can also cause a lot of problems. It’s important to understand how to get the best out of them while also avoiding the pitfalls along the way.

Here’s what you need to know about credit cards to get all of the benefits and none of the downsides.

The good

Credit cards offer several benefits. For example, they allow you to spread the cost of large payments across a period of time. They can cover important bills when cash is running low and enable you to pay for longer-term outlays (such as holidays) without eating too much into your day-to-day income. They also come with purchase protection, which means you can reclaim the cost of purchases between £100 and £30,000 in the event of the supplier going bust or the product going missing, for example.

Credit cards provide a flexibility that can be useful for managing your money, too, particularly if your income is up and down. A good record of repaying debts can also help to improve your all-important credit rating.

The not so good

If you keep on top of your repayments, credit cards generally work well. But once you fall behind on your monthly repayments, the interest charges can mount up quickly and more fees might be levied, leaving you with rising debts and damaging your credit score in the process. Watch out for other fees, too, such as charges for cash withdrawals and overseas use.

Understand the cost

This is crucial, because it can be easy to lose track. Credit cards charge an annual percentage rate, referred to as the APR. This covers the interest rates and relevant fees that are included in the cost of using your card. It is the figure to use when comparing different options. If you spend £200 on your credit card and the APR is 10%, for example, you’ll need to repay £220.

APRs vary widely. Some come with 0% interest-free periods before jumping to much more expensive rates when the 0% period ends. Others charge up to 50%, with the highest rates for those with poor credit records (for example, their credit history suggests they may not repay on time).

Once you’ve applied for a card, the provider will quote you a personal APR. This might be the same as the advertised APR, but certain factors could make it higher or lower, such as your age, employment status and income.

Keep an eye on your score

The biggest influence on your personal APR is likely to be your credit score or rating. This is a record of your previous credit repayments, including household bills as well as bank products. If you’ve always repaid on time, you’re much more likely to have a good credit score and be offered a good rate.

A record of late repayments, or failing to make them at all, will have a detrimental impact on your credit history. A poor credit score means your personal APR might be higher than the rate advertised, and your application could even be rejected.

Those without any repayment history, such as young adults, can also be charged higher personal APRs.

You can view your credit record through companies such as Experian and Equifax. Make sure you check for errors and ask the company to correct any that you spot.

Other pitfalls to watch for

It’s worth being aware that cards with 0% interest periods – where you can borrow for free – can quickly become more expensive if you fail to clear the card when the interest-free period ends.

Similarly, balance transfer cards allow you to move your debts around and keep interest payments down. But those transfers trigger fees, and they can be much more expensive for purchases than other credit cards.

Avoid the temptation to spend across a number of different cards. They can be easy to take out, but keeping track of them and repaying them all on time is much harder, leaving you at risk of getting into debt and damaging your credit score.

It’s also worth trying to make more than the minimum monthly payment. These can be low, but they also mean the repayments can be spread across a long period of time. The quicker you can clear it, the better for your credit rating.

Keep your options open

Bank overdrafts are perhaps the most obvious borrowing alternative, particularly if you need to borrow a certain amount for a certain period of time. Banks can no longer charge more for unarranged overdrafts than for arranged ones, under rules that took effect in April 2020, but some have responded by increasing charges for all overdrafts, so it’s vital to compare them properly.

Personal loans can be useful for one-off borrowing, and some are cheaper than credit cards, provided you repay on time. Loans typically have fixed or variable charges, and it’s important to know how the one you opt for affects your repayments.

Short-term loans, often referred to as payday loans, also have their place if you need to cover one-off expenses, especially if you don’t qualify for a competitive credit card or loan rate. But the charges can rise dramatically if they aren’t repaid on time, and the debts can quickly run out of control.

Other alternatives include prepayment cards, where you have to put money on the card before spending on it. They are a useful option if you are excluded from mainstream banking, are trying to repair a bad credit record or need help managing your spending.

There’s little doubt that credit cards are something of a double-edged sword. For all the advantages, such as helping you to manage your money and spread out costs, they can also cause a lot of problems. It’s important to understand how to get the best out of them while also avoiding the pitfalls along the way.

Here’s what you need to know about credit cards to get all of the benefits and none of the downsides.

The good

Credit cards offer several benefits. For example, they allow you to spread the cost of large payments across a period of time. They can cover important bills when cash is running low and enable you to pay for longer-term outlays (such as holidays) without eating too much into your day-to-day income. They also come with purchase protection, which means you can reclaim the cost of purchases between £100 and £30,000 in the event of the supplier going bust or the product going missing, for example.

Credit cards provide a flexibility that can be useful for managing your money, too, particularly if your income is up and down. A good record of repaying debts can also help to improve your all-important credit rating.

The not so good

If you keep on top of your repayments, credit cards generally work well. But once you fall behind on your monthly repayments, the interest charges can mount up quickly and more fees might be levied, leaving you with rising debts and damaging your credit score in the process. Watch out for other fees, too, such as charges for cash withdrawals and overseas use.

Understand the cost

This is crucial, because it can be easy to lose track. Credit cards charge an annual percentage rate, referred to as the APR. This covers the interest rates and relevant fees that are included in the cost of using your card. It is the figure to use when comparing different options. If you spend £200 on your credit card and the APR is 10%, for example, you’ll need to repay £220.

APRs vary widely. Some come with 0% interest-free periods before jumping to much more expensive rates when the 0% period ends. Others charge up to 50%, with the highest rates for those with poor credit records (for example, their credit history suggests they may not repay on time).

Once you’ve applied for a card, the provider will quote you a personal APR. This might be the same as the advertised APR, but certain factors could make it higher or lower, such as your age, employment status and income.

Keep an eye on your score

The biggest influence on your personal APR is likely to be your credit score or rating. This is a record of your previous credit repayments, including household bills as well as bank products. If you’ve always repaid on time, you’re much more likely to have a good credit score and be offered a good rate.

A record of late repayments, or failing to make them at all, will have a detrimental impact on your credit history. A poor credit score means your personal APR might be higher than the rate advertised, and your application could even be rejected.

Those without any repayment history, such as young adults, can also be charged higher personal APRs.

You can view your credit record through companies such as Experian and Equifax. Make sure you check for errors and ask the company to correct any that you spot.

Other pitfalls to watch for

It’s worth being aware that cards with 0% interest periods – where you can borrow for free – can quickly become more expensive if you fail to clear the card when the interest-free period ends.

Similarly, balance transfer cards allow you to move your debts around and keep interest payments down. But those transfers trigger fees, and they can be much more expensive for purchases than other credit cards.

Avoid the temptation to spend across a number of different cards. They can be easy to take out, but keeping track of them and repaying them all on time is much harder, leaving you at risk of getting into debt and damaging your credit score.

It’s also worth trying to make more than the minimum monthly payment. These can be low, but they also mean the repayments can be spread across a long period of time. The quicker you can clear it, the better for your credit rating.

Keep your options open

Bank overdrafts are perhaps the most obvious borrowing alternative, particularly if you need to borrow a certain amount for a certain period of time. Banks can no longer charge more for unarranged overdrafts than for arranged ones, under rules that took effect in April 2020, but some have responded by increasing charges for all overdrafts, so it’s vital to compare them properly.

Personal loans can be useful for one-off borrowing, and some are cheaper than credit cards, provided you repay on time. Loans typically have fixed or variable charges, and it’s important to know how the one you opt for affects your repayments.

Short-term loans, often referred to as payday loans, also have their place if you need to cover one-off expenses, especially if you don’t qualify for a competitive credit card or loan rate. But the charges can rise dramatically if they aren’t repaid on time, and the debts can quickly run out of control.

Other alternatives include prepayment cards, where you have to put money on the card before spending on it. They are a useful option if you are excluded from mainstream banking, are trying to repair a bad credit record or need help managing your spending.

Getting Started

Tell us a bit about yourself and the types of articles you’d be most interested in seeing. And we’ll serve up useful, personalised content that meets your specific needs. Easy.



Find out more about Choices