When they’re used correctly, credit cards can be a fantastic personal resource. And if you’ve been thinking about how to cope with the cost-of-living crisis, adjusting the way you spend money could help.
If you’ve only ever used a debit card before, you might need to learn a thing or two about how credit cards work – so we’ve outlined some key takeaways here.
What’s the difference between a credit card and a debit card?
Debit cards are a simple way to spend the money you have in your current account. They don’t involve any borrowing from banks, only the funds you already have – so once you’ve spent the money, you won’t be able to use the card.
On the other hand, a credit card works differently.
When you purchase something by credit, you do not need to have an account possessing a balance attributed to that card. Instead, you need to pay the billed total – usually monthly – for each accumulated purchase you made using the credit card.
Why should I get a credit card?
Being able to pay back your credit card bill every month will allow you to build and improve your credit score independently. In turn, this will boost your borrowing potential in future – whether that be for a car loan, a mortgage, or another significant purchase.
What are the main advantages of credit cards?
In summary, some of the stand-out benefits of spending money with a credit card include:
New customer bonuses
Most credit card providers offer incentives when you sign up. Depending on the credit card you choose, you could opt for a one-time bonus that works best for you.
Applying for a credit card with most leading banks in the UK should make you eligible for cashback. These schemes usually offer a small percentage back to you on purchases from certain retailers, effectively giving you a discount.
Loyalty and rewards points
Whether they’re in the form of cash bonuses, exclusive discounts or loyalty points for selected brands and retailers, you’re more than likely to be rewarded just for owning and using your credit card.
Are credit cards safe?
Yes. Because credit cards aren’t linked to your other accounts and have increased levels of protection, they reduce the possibility of losing money via fraud.
If a debit card is stolen by a thief, money can instantly go missing from your account. But if a credit card is used fraudulently, you can simply notify your provider and they should resolve the matter for you quickly.
Lastly, remember that getting a credit card won’t instantly fix your finances, especially if you’re in debt. You can find debt management guidance online with Citizens Advice.