Why pay with your credit card?

Credit cards are regarded by many with a degree of suspicion as an easy way to get into debt. Although we tend use credit cards for bigger purchases, using a credit card does not always mean that you are spending money you don’t have. Used responsibly, it can simply be seen as an alternative method of payment with its own benefits and drawbacks.

• Your credit report – using your card responsibly and paying the balance in full each month will help you build your credit score. The older the credit card, the more reliable you will appear, and the age of the account also factors positively into your credit score.

• Rewards and cashback – different cards offer different kinds of perks. These include points that can be exchanged for plane tickets, points that can be exchanged for goods or services, and even tax-free cashback, which means you get a small percentage of your spending back.

• Purchase protection – Some credit cards offer purchase protection against theft or loss on items you buy with the card.

• Fraudulent use protection – credit cards also give you protection against anyone else using your card without permission. The bank should refund any fraudulent payments.

Whilst these perks are a great way to get a bit extra from your everyday spending, they can be easily outweighed by bad habits such as missing payments or withdrawing cash. These not only incur fines, but can also damage your credit score.

If you decide to apply for a new credit card, make sure that your credit score is ready by checking your report regularly (Try out our 5 minute monthly checklist).