Unsure when spending on your plastic is the best idea? Then keep reading, because we’ve listed the do’s and don’ts when it comes to credit card purchases.
Credit cards are something nearly all of us carry around with us… but, when used in the wrong way, they can turn into more of a hindrance than a help. That’s why it’s important to clue yourself up on the key features of a credit card to decide which purchases might be good (and not so good) to make with your plastic.
Nowadays, banks and lenders try to catch our attention with tempting offers and different benefits and rewards. We’ll discuss the advantages that come with a credit card in more detail, as well as situations that could spell disaster.
The perks of buying with a credit card
Section 75 and 75A of the Consumer Credit Act can be your best friend when it comes to spending on a credit card.
Section 75 applies to purchases made on a credit card between the value of £100 and £30,000. In a nutshell, this protection means that if bought something and it never arrives, isn’t what you ordered or is faulty – or your card is used fraudulently – the credit card company might refund you when the retailer doesn’t. However, there are some exceptions when Section 75 may not apply, like when the payment is taken through a third party.
It goes without saying but to avoid getting yourself into financial trouble, you could use your credit card for those smaller purchases or for any emergencies you have. If used responsibly, your credit card could get you out of sticky situations.
For example, your credit card could be useful if you suddenly find yourself needing to replace your washing machine, but you don’t get paid for another two weeks.
You probably weren’t expecting to see the word budget used in an article about credit cards, but actually, when used properly, credit cards can be a valuable tool when it comes to budgeting.
Because credit card bills come monthly, you technically have 30 days to manage your cash flow by buying things using a credit card. You’ll also be able to see what your minimum repayment amount is each month, so you’ll know how much you need to pay back.
As mentioned, many credit cards now come with rewards like cashback. This gives you even more reason to spend on your credit card over your debit card for day-to-day purchases.
So, as long as you keep track of what you’re spending in order to reap the rewards, and make sure you can afford to repay your balance on time and in full each month, credit cards can be a financially savvy device.
Things you could buy with a credit card
High-value items – thanks to Section 75 and 75A’s protection, you may have an added level of security when using your credit card. This could prove to be worthwhile when making one-off purchases, like electrical appliances and furniture.
Holidays – paying for your flights and holidays using a credit card will protect you if something goes wrong. In fact, if you’ve purchased your holiday on a credit card, you might find you’re covered even if you don’t have travel insurance.
Groceries – a lot of the big supermarkets now offer reward-based credit cards which give you points and money off future shops if used in-store.
Home contractors - if (and that’s quite a big if) your contractor does take credit card payments, it could be worthwhile doing this as you’ll potentially be able to dispute the cost if you’re not satisfied with the work that’s been done.
Debt consolidation – if you have multiple unpaid debts, you might feel overwhelmed by the different interest rates, payment dates and remaining balances. In this case, taking out a balance transfer or money transfer credit card might be a sensible option. Such cards allow you to merge all your debt into one, leaving you with one interest rate and one monthly repayment amount. If you do your homework and shop around, you could also find you’re saving money on interest with this alternative.
Things you may want to avoid putting on your credit card
Gambling transactions – many credit card providers now block attempts to gamble with a credit card. Doing so makes it easy for someone to very quickly spend money you don’t have and, without realising, amass a big balance that they’d struggle to pay back.
Rent and mortgage payments – many landlords and mortgage providers won’t accept payments by credit cards. If they do, there’s likely to be a fee involved. If you can, and want, to use your credit card because of the rewards involved, it could be useful to do your homework and ensure the benefits outweigh the fees.
County Court Judgements (CCJs) – borrowing money to cover existing debts isn’t usually a good idea as it could worsen the position you’re already in.
When you can’t afford to pay it back – as tempting as it might seem to buy something you really want, spending money you know you’ll struggle to pay back could get you into serious financial trouble.
The golden rule to using your credit card for any purchases is to only ever spend what you know you can afford and pay back more than the minimum amount each month on time and in full.
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