Is it wise to use my Credit Card this Christmas?

Is it wise to use my Credit Card this Christmas?

Using a credit card is something that many of us do automatically but it is something that we should really think about. This is because a credit card will normally cost us money to use and we should be trying to avoid spending unnecessary money if we can help it. However, there are advantages to using a credit card and it is worth thinking through the advantages and disadvantages before you use the card.

Costs of a credit card

Costs of a credit card will vary. Different cards have different rates and so it is worth comparing these to see which is cheaper. If you do not repay the full balance each month on your credit card then the cost can be high and so it is well worth comparing the interest rates and fees of different cards to see which might be the best for you to use. However, if you repay the full balance each month, then the cost to you is nothing. Therefore you should be looking for other features in a credit card. Perhaps looking for a cashback card could be worth it as you will actually be paid for using the card. Although the cashback is likely to be low, you will still get more than you would if you used a card which did not have this facility. You do need to be careful though as a cashback card will have higher interest and so if there is any risk that you will not be able to make a full repayment each month then this may not be a wise idea for you.

Free credit with the card

Using a credit card is a great way to buy now and to pay later. You will not have to pay for items that you buy on the card for about a month and so it means that you can spread the cost by buying some items on the card. Of course, there is always a risk that you will overspend because it is not easy to remember what you have used the card to buy. However, if you are careful, you should be able to track your spending, either by noting it down yourself or by checking online if there is an online banking option with your card.

It is really important not to think that your credit card is just free money though. Although you can use it for free, unless you pay off the full balance when you get the bill, there will be a charge and you will be expected to repay what you have spent eventually. Just because there is no formal repayment plan, like you get with some loans, it does not mean that you should not repay it. In fact having no repayment plan is a big disadvantage as it means that you are not forced to pay too much back and therefore the charges on the loan add up and up.

Security of using a card

There is an added security with using a credit card compared to other means of paying. People can often be scared of buying online, for example, but a credit card offers some protection. Although it is possible that someone could intercept your card number and use it, they cannot get your current account details. The companies are also used to dealing with fraud and tend to have a fraud department that will track transactions and put a stop on the card if they notice anything suspicious. They will also cancel a card and send out a new one if you report fraud. Credit card companies have insurance built in and so if you have money stolen from it, they will repay it to you. Also if you buy goods and they are faulty or do not turn up then their insurance will pay out for you, so that you do not lose out. You will not get this sort of cover if you pay by other means such as debit card, BACS or Paypal and the credit card can be the best way to buy things, especially if they are of high value or you buy online.

Conclusion

So as you can see there are many advantages to using a credit card. However, you do need to be careful as it can be costly. If you set up a direct debit to pay your credit card bill in full each month, then there is no risk that you will be charged any interest and you can take advantage of all of the services offered by the credit card company without actually paying for them. This means that the get the insurance, fraud protection and free credit as well as cashback, if the card offers it, all for nothing which can be well worth it.