Credit Cards: Use Wisely

Published on: March 14, 2022

Used well, credit cards can be incredibly valuable for their purchase protection benefits (I learned this when a family holiday was not paid for on a credit card to a firm that went out of business the day before we travelled) as well as their usefulness in smoothing out the more expensive periods of the year (all year if you have children?!).

Used badly however and they can undermine the best laid of financial plans. Typical interest rates of 18.9% and more, mean that making minimum payments are an expensive way to borrow. By making a £50 per month repayment on a £1,000 balance, the loan will take two years to repay at a cost of £190 interest.

Credit card payment protection is mandatory under the Consumer Credit Act for all purchases over £100 and under £30,000. Debit cards don’t offer this protection which is one of the reasons why it can be a good idea to use your credit card to pay for purchases over £100.

Credit card protection can help to cover the cost of your purchase when:

  • The retailer goes out of business before you’ve got your purchase.
  • Buying an item that’s damaged or faulty and the retailer cannot or will not refund or replace
  • Your item arrives and it isn’t the same as the description
  • Your item doesn’t arrive but you’ve been charged

QUICK WIN: Ideally, repay balances on time and in full so no interest is paid. If this isn’t realistic, use comparison sites to find 0% interest deals which are available for up to 30 months in some cases, though always have a Plan B so that if for whatever reason, these deals are not available in the future there is a strategy to repay any accrued debt.

  • Disclaimer:Three Counties does not advise on mortgages and debt and this post is for general information purposes only. As a mortgage is secured against your home, it could be repossessed if you do not keep up the mortgage repayments. This blog post was taken from a Three Counties ebook, Your Family, Your Finance, Your Future – click here to download the full guide.
  • Writer Bio: Martin Howe is a Director with Three Counties and has over 20 years’ experience in financial services, specialising in all areas of financial planning.

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