A guide to Credit Cards

CREDIT CARDS EXPLAINED

We’re living in a cashless society, and instead of our purses and wallets being unburdened from the disappearance of notes and coins they are instead stretched out of recognition by these numerous cards.

At the forefront of the cashless society is the credit card, that wondrous piece of plastic that allows us to make purchases beyond our immediate means. Britain has over 31 million credit card holders, owing around £180 billion as a result.

There are many different types of credit cards and they all seem the same, but what exactly are they?

This is an important question and one that this guide will answer, helping you to make an informed decision.

WHAT IS A CREDIT CARD?

There is a glut of credit cards out in the market and you’ve probably head of a few of them, like: MasterCard, Visa and Maestro. Credit cards are not the only cards out there and you would be forgiven for confusing them with debit cards and charge cards.

Debit cards are effectively plastic cheques, the cost of any purchases you make is, more or less, immediately deducted from the account it is linked to. A charge card allows you to purchase item and sometimes even withdraw money which it requires you to pay off every time they send you a statement, usually on a monthly basis.

Almost all credit cards, however, allow for indefinite borrowing and only require a monthly minimum partial repayment. The credit comes with an interest rate that can vary widely depending on the card and can even be as low as 0% in introductory offers.

HOW AM I CHARGED INTEREST?

Interest will be charged monthly for any outstanding amount on your credit card. The interest rate varies between creditors and shopping around is always recommended.

WHY SHOULD I GET CREDIT CARD?

A credit card is a useful way of creating a credit history and, if used carefully, can give you a great amount of spending flexibility.  

Probably the most beneficial part of purchasing items with a credit card is the addition protection you’ll receive. Under section 75 of the Consumer Credit Act 1974, any complaint that you make against a supplier for breach of contract or misrepresentation will also apply to the credit card issuer. This means you can make a claim to your creditor if the supplier refuses to give you compensation. 

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