If used wisely, there are lots of perks of having a credit card and we’re going to break them down in this post. Think extra protection, cheap flights, restaurant vouchers, cashback… the list of perks is long!
Disclaimer – this is not financial advice, simply for educational purposes. Please do your own research before taking on a credit card and make sure to pay off the balance in full every single month to avoid getting into debt.
Although I am very money savvy and have never been in ‘bad’ debt, I’ve always been a tad scared of getting a credit card. I always felt like having a credit card was the reason for consumer debt, so I wanted to stay away.
My reasons for avoiding getting a credit card were along the lines of… What if I miss a payment by accident? Would I spend too much? What if unhealthy spending habits form?
But if used correctly, credit cards can be a valuable financial tool that make you an even more savvy spender. So after looking into the perks of having a credit card a little more, I decided to finally get one last year.
After doing my own research the perks outweighed my fears. I took the plunge and got my first ever credit card! I’ll go more into details on which card I went for and the benefits I got later in the post but first let’s look at how to use a credit card correctly and then the perks of having a credit card.
How to use a credit card correctly
No amount of points or rewards are worth getting into debt for. Credit cards come with an insanely high interest rate. Typically ranging from 18-35%. This means you will pay back far more than you spent if you carry a balance on your card. High interest rates are how credit card debt can get out of control quickly and people find themselves in a bad financial situation.
But it is possible to use credit cards without having to pay a single penny in interest. You simply have to make sure to pay off the balance in full every single month. To make it easier, you can set up a direct debit to take the full balance monthly. This will ensure you don’t miss a payment.
The biggest rule to follow with credit cards is to not spend more on it than you would spend in cash. This way you should always have enough money to pay it off in full.
The perks of having a credit card
Now we’ve covered how to use a credit card correctly without getting into debt. Let’s look at the perks of having a credit card…
Section 75
One of the main reasons I first looked into getting a credit card was to get covered by Section 75. Section 75 of the UK Consumer Credit Act dictates that your credit provider takes on joint responsibility and liability if a retailer breaches a contract or misrepresents goods. In normal words, this means you can get your money back on purchases made with a credit card if the items are faulty, don’t arrive or the retailer goes bust.
Under Section 75, you are protected for purchases between £100 and £30,000. This is one of the biggest perks of putting larger purchases on a credit card.
Boost your credit score
My credit score has never been great because I’ve never really borrowed money or had much on finance but getting a credit card and using it correctly will improve my score over time.
Your score might take a slight hit just after getting the card. But once you use it for a few months and pay it off on time, it’s very likely that your score will improve.
If your credit score is too low to get a credit card right now, look out for credit score builder cards which are designed for people with low credit scores to get started.
Budgeting tool
Credit cards typically work on a 6 week billing cycle. This means that if you made a purchase on day one of a new statement period, it wouldn’t be due until 6 weeks later. If you use this knowledge smartly, credit cards can become a great budgeting tool.
By using a credit card, you are leveraging the bank’s money instead of your own. This is good for your month to month cash flow.
Points & Rewards
Now this is the biggest reason I started using credit cards. To get points and rewards you can get from money you were already planning on spending. From cashback to vouchers, exclusive perks to flights, you can get lots of rewards for free just by using a credit card for your spending instead of a debit card.
Amex Points
Amex, is a very well known credit card company who are great for offering cards that come with points and rewards. They have their own membership reward points but are also partners of lots of other reward programs, such as the British Airways Avios program. At a base level, 1000 Amex Membership Reward points are worth £5 if you redeem them as a voucher.
That is essentially a 0.5% cashback rate on your spending. Alternatively, with Amex points you can redeem them against your credit card bill at a slightly lower rate.
Collecting Avios
For my first card, I went for the British Airways American Express card which exclusively allows you to earn Avios. With this card, you can get 1 Avios for every £1 spent. Plus if you’re new to AMEX you can get a sign up bonus too.
If you apply for a British Airways Amex through a referral link and spend over £2000 within the first 3 months, you’ll get 6000 bonus Avios. That’s 8000 Avios total for this cards welcome offer. Find out more and sign up here.
I have been using this card for big expenses and everyday spending like fuel, to passively collect Avios which I will eventually be able to use for a cheap flight. For example, I found return flights from the UK to Dubai for just £100 and 50k Avios. I currently have around 40,000 Avios so I’m not far off this or I could use them for short haul redemptions too.
Above are just a couple of the featured rewards flights on the Avios app. Beyond credit cards, you can also collect Avios like cashback via the app. Check it out here.
Beyond flights, you can also redeem Avios with one of their partners, including Pizza Express, one of my favourite places. For every 1000 avios you can get a £5 Pizza Express voucher. Plus you can earn Avios when you spend at Pizza Express as well. Perfect perk for me!
There we go, the big perks of having a credit card and why you should get one. How do you feel about credit cards? Do you already have one? What types of rewards are you getting? I’d love to hear all about it in the comments.
