Credit cards have become a integral part of modern day life with around 65 million in issue at any one time in the UK, according to the British Bankers Association (BBA). And, providing they are treated in the right way, this kind of plastic can be a very useful tool.

For example, when buying goods with a credit card - providing they cost over £100 each - you will be protected by the Consumer Credit Act 1974. This states that the credit card provider and trader are equally liable for the purchase, which means that if your goods are are lost, damaged or stolen you can claim back the cost from either party. This is especially useful when buying online in case the transaction turns out to be fraudulent or the retailer does not exist. And many internet users also like the peace of mind that they are not throwing their personal bank details into cyber-space.

But some people simply like to organise their finances with the help of a credit card. For example, they pay for everything with the card all month - leaving their wages in their current account untouched - and then pay off the balance at the end of the month. This way no interest is incurred on the credit card but interest is earned on the balance in the current account. And of course, any risk of overdraft charges is avoided.

However, the proportion of credit card balances bearing interest is around 73%, according to the BBA, which is not so clever. Debt sitting on credit cards is likely to incur extortionate rates of interest and is a very ill-effective way of managing your money.

To find out more, read the CashQuestions guides to credit cards and find the most suitable one for you in Find the best deal.

CashQuestions Guide to Choosing a Credit Card

How Credit Card Interest is Charged

CashQuestions Guide to Credit Card Hidden Charges

CashQuestions Guide to Balance Transfers

---

Tag this article :