Do I need a credit card? What are the benefits?

fireblade28

Hi all,

I have been dabbling with the idea of getting a credit card but I keep coming back to the 'What is the point for me question'

I don't understand them at all, maybe that is a sign I shouldn't get one. I only own a debit card.

So what exactly is the point? It just seems like a debit card that you have to pay interest on.

Maybe I don't understand credit history enough but I do not have any loans, I will never buy anything on finance. I will never have a mortgage because I am going to rent (Most people assume this is throwing away money but actually do the calculations)

Please correct me if I am wrong but tell me what the point is

opinions4u

From what you have posted you don't need a credit card. It isn't an essential.

Additionally, I've done 90% of my spending in my adult life on a credit card. I've never paid a penny in interest.

The cycle works along the lines of:

- make purchase on card
- stick amount of purchase in a savings account that pays me interest
- get bill
- pay bill in full
- repeat until death

Once you've had a credit card for a period of time you'll find it easier to get a different card elsewhere. So you could progress to a credit card that gives you cashback.

In my case, 1% of what I spend on my credit card is returned to me each year by the card company. Other cards will give air miles, hotel rewards, clubcard points etc.

£200 a year that I wouldn't have otherwise.

A credit card can also be convenient if you travel for booking hotels, car hire or making purchases / withdrawing local currency (usually costs you extra) in the UK or overseas.

If you get into using a credit card for cash withdrawals, or don't clear the balance in full each month, you will pay interest. If you spend more than you would have done simply because you have a card then it may not be a good idea.

For me it's a simple and convenient budgeting tool that pays me for using it.

anotheruser

I was like you and didn't really understand Credit Cards.

I did have one but barely used it - a limit of £500! However now I have the Santander 123 and Halifax Clarity. I use the former for supermarket and petrol (to get the cashback) and the latter for abroad.

It all depends how you use it.

If you save, then buy you should be fine with a credit card. If you have £100 in your account, but spend £500 on a credit card, because you know can pay it off over time for a nominal fee (like a mini loan I guess), then you may run into trouble in the future.

So long as you have enough money to pay it off (mine is on a direct debit), then you will have no problems, it won't cost you anything to have.

But if you're fine without one, don't get one for the sake of it.

lisyloo

So what exactly is the point?

The benefits are:

1) cashback/rewards
2) joint liabiity accepted by credit card companies e.g. section 75 protection
3) Can help with budgetting if used wisely
4) useful for car hire/hotels
5) shows you can manage credit on your credit report
6) extra perks

1. Many card offer some form of cashback/rewards jsut for spending on them.

2. If a company goes bust you can get your money back as the CC company are jointly liable. Debit cards have a chargeback scheme but that's voluntary whereas section 75 is the law and CC companies have to help you.

3. If you are using a debit card then you must need some sort of "float" to cover the purchases. A credit card acts like your float so you can put your own money in savings and not need your own float.
Personally I would find this difficult as the amount I spend varies a lot e.g. this month I have an expensive holiday.

4. Car hire companies in particular and hotels like to put a reservation on your credit card. This is to cover damage, purchases etc. so they know they can paid even if you run away. In certain countries you'd probably find you need a big deposit to hire a car without a credit card.

5. If you want a mortgage in future then it's a good idea to have a credit account on your credit report to show you can manage it well.

6. Some offer extra benefits e.g. extra insurance. In some cases these perks can be quite significant e.g. concierge services, booking tickets, getting upgrades, airport lounges.
I've got a lounge card from Amex. For some individuals these benefits are significant.

Managed well, credit cards can cost you nothing and be an aid to managing your finances.

chattychappy

If you travel abroad, some CCs work out cheaper than debit cards because they don't load the transaction. Since cards are sometimes declined, having CCs is more robust. It is simpler to have multiple CCs than multiple debit cards. CCs also act as a "firewall". In the event of fraud it's not your money that's taken. Though there are protections with debit cards too, you are better protected with CCs.

I don't NEED a mobile phone, but before I had one I had to much more careful about planning my day and couldn't be so flexible if there was a change of plan. Ditto CCs. I could survive without them, but I'd spend more time running "what-ifs" in my mind.

As for borrowing, the "headline" rates are expensive. But once you get a good rating there are some deals around. CCs will offer a good deal (ie low interest) in the hope that you will not be able to pay back in time and be able to charge more interest in the future. If you are careful you can play this game to your advantage. Some years ago I financed an LLM on CCs. Must have borrowed around £30K at one point, all on 0% APR, with the odd 3% fee as I shifted the debt around. I could never have done that with "normal" loans.

malefic

If you are sensible then as the people above have mentioned, you can use the card and get cashback, points to get other things etc.

Just make sure you pay off what you owe at the end of each month and you are laughing.

Wish I lived by the 'pay off at the end of the month' line, I wouldn't still be paying off my youthful stupidity many years on!!

datlex

Totally agree with what has been said above by the others.


A credit card is not essential but it can have certain benefits.


1) Some cards have rewards- points or cashback
2) Some cards linked to stores will offer discounts to card holders on top of other discounts
3) Some cards offer deals with other companies (though you should always check this is the cheapest if you decide to use them).
4)As mentioned above the reassurance of section 75 cover.
5)If you get a 0% deal the advantage of being able to keep your money in savings and earn the interest
6)It helps you build up a credit reputation, which may be useful.