Benefits and Risks
A credit card offers many potential benefits but, like any credit product, it can also have downsides if used irresponsibly. Credit cards are just one way of borrowing money. If you want to borrow for the longer term then a personal loan might be more appropriate.
Benefits
Used sensibly credit cards can provide:
- free, short-term credit on purchases, as long as you always pay your bill in full by the date shown on your statement
- a safe and convenient way to pay for goods and services, particularly over the Internet, by telephone or by mail order, for business both in the UK and abroad
- protection against fraud - if you are the innocent victim of fraud you will not be expected to pay if a criminal uses your card
- incentives for using a card such as loyalty points and cashback, or payments to support a charity;
- a truly global currency as credit cards are accepted in virtually every country around the world
- perhaps the most flexible and convenient way of borrowing money in the short term.
Risks
Used irresponsibly credit cards can:
- lead to unplanned levels of debt that you could find difficult to repay
- incur charges if you make late payments, miss them altogether or go over your credit limit
- damage your credit rating if you continually make late payments or miss them altogether
- cost you more and take you longer to pay off than the alternatives, particularly if you only ever make the minimum repayment
- make it difficult to manage your finances if you have more cards than you need.
To help minimise the risks you must always be honest and responsible when completing an application form. If you lie you could be charged with defrauding the card company and risk prosecution.
ALWAYS USE YOUR CARD IN A RESPONSIBLE AND SENSIBLE MANNER
