The benefits of credit cards

Whilst credit cards can be an expensive form of borrowing money with most charging an APR (Annual Percentage Rate) 10% and 20% they can provide some useful benefits and rewards.

A major advantage of using a credit card to purchase something over  cash or cheques are that you have legal protection under the Consumer Credit Act if your purchase is between £100 and £30,000. This is useful if your purchase is damaged or if you order it online if it fails to arrive. Under these circumstance you can claim the full cost of the purchase from your credit card provider. This is useful if you make a major purchase with a long period between the goods being ordered and being delivered in case the company you bought the goods from runs into financial difficulties and decides to keep your money but not give you your purchases.

Another advantage over cash and cheques is that credit cards offer an interest free period of between 45-59 days. Both the Amazon and Halifax One credit cards currently offer 59 days credit. If you know  your statement dates it is possible to time it so you make any large purchases at the start of this period in order to take maximum advantage of the interest free period.

If you have a balance outstanding with one credit card company that  is charging you interest you can transfer this balance to a new credit card offering an introductory rate of 0% and save yourself some interest. Alternatively some cards offer introductory rates of 0% only on new purchases. This allows you to either continue spending as normal and to save the money you would need to repay your purchases in a savings account therefore actually earning interest from your credit card rather than paying it out. These 0% introductory rates can also be useful if you are about to make any major purchases as you will have until your introductory period, which could be anything from 3 months to 1 year has elapsed before you have to pay for your purchase.

If you intend to make purchases whilst you are abroad on business or on holiday then the Nationwide credit card has 0% EU and Worldwide loading on purchases whilst most other credit card companies charge between 2% and 3%.

Several credit cards offer money back rewards on a % of your spending. American Express and MorganStanley are both running 2% cashback promotions at the moment. Other credit card companies offer you points for each £1 you spend which can then be redeemed against a choice of different loyalty rewards such as Marks and Spencer, Amazon, Virgin and Tesco. Some other credit cards offer to pay a % of your spending to your favourite charity or sports club.

As well as some introductory freebies such as free pens, free CD players and free wine some credit cards offer travel accident insurance, purchase protection (covers most major purchases over £50 against accidental damage and theft for up to 100 days if you pay for them in full using your card) and online fraudulent guarantees.

Owning a credit card is also a good way of improving your credit score as long as you keep up your repayments.

All of the above benefit make credit cards a convenient and beneficial way of spending your money.