Confused.com tips on matching the right type of card to your type of spending
When choosing to use a credit card or debit card, our first question is often, ‘can I afford it this month?’ When it should actually be, ‘what’s in it for me?’ More than a mere substitute for money, credit and debit cards can get us flights, cashback or even an interest-free loan.
So which card to use when and why? Confused.com has the answers…
Spending money abroad
Beware of hidden charges when using credit cards and debit cards abroad. Most providers add a handling fee or loading charge (an automatic charge you pay to the lender) to all cash withdrawals and purchases made overseas, typically 2.75%. Credit card companies can also charge around an additional £2 or 2% - whichever is greater - for cash withdrawals.
However, despite these costs, credit cards can offer a more convenient way to shop while on holiday. Major credit cards are almost universally accepted and many card companies offer insurance to customers on purchases made abroad.
What to use on the high street
Credit cards offer different rewards for spending. Customers can get everything from air miles to shopping vouchers. For those planning to make a large purchase, certain credit cards offer introductory interest-free payment periods. Or if you’re a sensible shopper who pays off their credit card at the end of the month, look out for credit cards which offer ‘cashback’. Canny card-owners can earn back 0.5 to 1.5% of what they spend. But watch out for higher interest rates.
When you need a bit of protection
Credit cards offer fantastic protection to consumers. Whether you’re surfing the web or in the supermarket, if the purchase is between £100 and £30,000, it's a good idea to put it on your credit card. The Consumer Credit Act means that if you buy something faulty or “not as described” you can recover the cost from the card company. They have the same responsibilities as a retailer, which might be particularly handy if the shop goes bust before that new sofa arrives!
Be clever with your cards
If you take advantage of enticing offers on credit cards, be aware that when the introductory period ends, you could end up paying large sums at the end of the month as the interest rate goes up.
Finally, don’t be afraid to shop around. As long as you pay your credit card bills on time, taking advantage of good deals shouldn’t adversely affect your credit rating.
