Understanding credit cards

Refeuh

Hi all !

This might sound like a very stupid question... But I've never properly understood the point of credit cards :-?

Well, I think I understand the point, but I don't understand why you'd want to use them. As I'm clearly missing something, I thought I'd ask here


Basically, I've only ever used "debit cards" ; it's simple, direct money transfer, no interest rates to monitor, etc. It's handy and it just works.

If I need to pay bills, services, rent, etc. I'll use direct debits and similar forms of bank money transfers.

If I need to pay for very expensive things (e.g. buy a new car), I might get a special credit or loan just for that.

For everything else (from every day purchases i.e. groceries, to slightly more expensive things, such as clothes, computer hardware, music instrument, etc.) I use my debit card.


But I see plenty of ads, offers, etc. for credit cards. And I'm thinking "why would I want a clunky system where I need to monitor my credit line, repay things a on regular basis, be charged interests, maybe pay an annual fee, etc. ?"

Apparently, some offer minor benefits, e.g. cash back, tesco points, etc. But that sounds like it's not worth it, compared to the effort and clunkiness of managing a credit card.


The only valid point my bank made when I asked about this is the slightly better customer protection when using credit cards for online payments ; I'm fairly happy with the default protection offered by services like PayPal though.


Bottom line... the question is simple : why would someone want to use a credit card over a debit card, if you don't have to care too much about your weekly regular spendings ?


That probably sounds very stupid, but that's been confusing me for a while Any input would be greatly appreciated.

Regards

molerat

With a credit card you have consumer protection for purchases over £100.
My card gives me loss & accidental damage cover for 100 days on purchases over £100.
You get up to 56 days interest free on purchases.
Some cards give cash back on purchases, I get over £100 each year.
If you need an emergency purchase you can get it straight away and either pay it off monthly or arrange other money before the bill comes in.

Cards are only "clunky" if you make them. I keep my money in a high(ish) interest paying account and I get 2 weeks notice of needing to move it into my current account for the DD to pay the card off. I keep my spending on a spread sheet and just added extra columns for the credit cards, the bottom number of how much left to spend is still the same whichever method of payment is used.

If used correctly a CC has loads of benefits but used incorrectly it is the plastic from hell.

[Deleted User]

And also to build your credit history. You say you might get a 'special credit or loan' for something expensive, but unfortunately, if you haven't demonstrated you can handle credit, it will be one of those very special loans with a special high interest rate.

JimmyTheWig

As long as you pay off your bill in full every month you don't get charged interest.
So it means you can pay for things when you need them and sort out where the money is coming from by the time the bill comes in. E.g. you don't need money in your current account for every eventuality.

StuC75

Also protection against fraud - I use just one of my cards for online purchases safe in the knowledge that if it gets plundered its the banks money and not mine thats under dispute.

CLAPTON

maybe if you had been a natwest customer this last few days, having a CC might have been useful

Refeuh

Thanks for the input, that's all very useful !

I guess I'll have to watch more closely the credit card offers and the benefits that come with them...
But so far it always seemed to me that the cost/benefits ratio made them mostly unattractive. I might have been looking at the wrong products.

Thanks

Gromitt

I had my latest card simply because it's 12 months interest free on purchases. So far I've spent £3000 on it, I'm paying £25/month and the £3000 is in a 3.17% savings account. I also got £30 cashback as well as the usual credit agreement protection.

Once the 12 months are up, I'll just pay off the balance.

No charges, no checking interest rates, just advantages for me.

aideng

As long as you use it right it has a lot of benifits, but with great power comes great responsibility!

Musicpirate

Good for self employed people like myself, sometimes materials/tools are needed for a job and can be bought without risking the cash that's supposed to come out of the current account on bills, usually you'll get "trade cards" in places like B&Q which are essentially credit cards just for this purpose.

warwicktiger

I applied for a Tesco card because of the 16 months interest free on purchases because I have an offset mortgage. Whenever I use the card I transfer money from my current to savings account, both of which are linked to my offset mortgage, so am using the interest fee balance to reduce the interest bill on the mortgage whilst knowing I can repay the balance at will.