There are obvious risks with credit cards. They are an easy way of spending money that you don’t have, and that can cause big problems if they are spent on unnecessary activities. Gambling, for example would have been a terrible way to utilise credit cards, increasing an individual’s debt in most instances, but the sector has now banned use of credit cards. 

However, credit cards are not all bad. In fact, a good use of credit could be highly beneficial to an individual in later life. A big plus is the boost it can give to your credit score. 

A good credit score is a key to approval on big-money loans such as mortgages. It can also give you access to some of the best credit cards on the market. If you haven’t used a credit card before then your credit score will be relatively low; this is because you haven’t had the opportunity to show that you can borrow money in a responsible manner. 

You can build your credit score with a credit builder card. Cards like this are designed to help people who have low credit scores and limited credit history. These cards will improve a person’s credit store, as long as they fully pay off their balance each month. 

However, you will face high interest charges if you’re unable to pay back the full amount. It’s also very important not to miss a payment date because it will severely damage your credit rating. The aim of the game is to show that you are reliable and that means paying back the money that you borrowed in the timeframe that was set. 

A savvy reason to use credit cards is because they can actually be considered safer than debit cards, when buying expensive goods. A retailer and your credit card issuer share the same responsibility for any purchases between £100 and £30,000; this means that if something goes wrong, your credit card issuer will be fighting your corner to solve the problem. This is noted in Section 75 of the Consumer Credit Act.  

The two best reasons for using credit cards are that they can increase your credit score while covering for paid material that doesn’t go according to plan. More benefits are listed down below.

Other benefits of credit cards

It’s important to discourage heavy spending on credit cards, unless it is carefully planned and thought out. However, certain credit cards can come with financial benefits. Some will offer cashback offers, store points or frequent flier miles if you enjoy travelling abroad. 

Rewards credit cards and cashback credit cards are capable of offering these goodies. Most rewards cards do come with an annual fee, though, meaning that you will have to spend and repay enough money to make it worthwhile. It’s also important to remember to clear your balance in full each month as interest charges will then outweigh the benefits. 

Additional benefits

Some credit cards can offer access to airport lounges or discounts to other hospitality venues. A card like this will probably require a substantial annual fee so it’s vital that you think before obtaining one of them. For example, if the card has a £70 annual fee then you must work out whether or not you can save more than £70 through the use of this card. If the benefits that come with this card do not equate to more than £70 in yearly saving then the card will not be worth your time. 

Overseas spending can be simplified with certain travel credit cards. They can offer better exchange rates and they don’t charge a fee when you spend on them. Obviously, this would benefit travellers or people who travel internationally as part of their line of work.

Conclusion

Many people worry about the use of credit cards but credit score is a big thing. It can be the key to unlocking closed doors. What must be reinforced is the importance of using credit cards sensibly. Credit cards can still be dangerous tools that exacerbate existing debt problems. They should not be used without consideration; this money needs to be paid back. 

The pros of credit cards outweigh the cons but we would recommend avoiding them altogether if you have a compulsive desire to spend on unnecessary things. 

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