7 Reasons You Shouldn’t Be Scared of Credit Cards
If you’re reading this, chances are that you like to travel and are in some way interested in points and miles. There’s also a high chance that you have already taken out one of the best miles and points-earning credit cards available in the UK. When I speak to friends and people I meet about how it all works, I usually get one of two reactions: ‘Amazing, how do I sign up?’ or, ‘Oh no, I wouldn’t ever get a credit card — they’re bad news’.
There are many ways to earn points and miles, but without doubt, the most lucrative way is through using a credit card. So if you fall into the category of credit card haters, let me explain why they’re so great and essential if you really want to maximise your travel.
Credit Cards Do Not Necessarily Mean Debt
The biggest worry of all seems to be that having a credit card instantly means that you will get yourself into a load of debt. Yes, credit cards often have huge spending limits, which might be more than your monthly salary, but ultimately you are in control of how much you spend. There are ways and means to make sure this doesn’t happen:
- Most credit cards allow you to reduce your spending limit. That way, you can spend only the amount of money you earn each month, meaning you can pay the card off in full each payment date.
- You can set an automatic payment every month from your bank account to your credit card so that you don’t even need to worry about forgetting the balance due date.
- Some cards that are charge cards have to be paid off every month.
Keep in mind though that credit cards aren’t right for everyone. Before applying for a card, you should understand your own financial situation and how your credit score works. If you’re not in the right place financially, it might be best to avoid applying. If you’re able to responsibly spend on the card and pay your balance off in full every month, you could be ready for a credit card.
If you are in the right place financially for a credit card, you could take advantage of their benefits. Debit cards are most peoples’ first choice for payments, and I understand why — the money comes straight out of your account and you can check your balance to see how much you have left. Nowadays, most of the major UK banks offer some kind of cashback on bills paid on the card or similar.
However, that cashback is usually the only benefit, and 1% or 2% cashback on utility bills is nothing compared to 1 or more mile per £1 spent. The earning structure compared with the many other benefits associated with credit cards can reward you more in the end.
Good Travel Accessory
Travelling can be both a burden and a risk financially — especially if you rely solely on a debit card, or worse, cash when you’re abroad. For starters, most hire car companies need to block a certain amount about of funds from a credit card in the driver’s name as a guarantee, something that’s not possible with a debit card.
In terms of actual spending, some credit cards even reward you for spending in foreign currencies by increasing the amount of miles earned per spend. (Though keep in mind that nearly all credit cards in the UK charge a foreign transaction fee of around 2.99% for international purchases.) Some places in Europe still only accept debit cards or cash, but you can register credit cards like the Virgin Atlantic Reward Credit Card onto the Curve card, which allows you to pay for things as if it was a debit card and even take cash out of a cash machine with no additional fees.
I used to pay annually for my travel insurance, but I don’t need to anymore thanks to being covered through the insurance on one of my credit cards. It provides me with worldwide travel insurance for trips up to 90 days and offers very generous cover for medical expenses, trip cancellation, personal belongings, car rental and more. Though some of those benefits are subject to enrollment, I know that I can go away on a trip and be covered if anything goes awry.
Having a bad credit score can affect your chances at buying a house or car. One of the best ways to build up your credit score and increase your chances of being accepted for mortgages is by using a credit card and paying it off on time. Understanding how credit works and why yours is the way it is is critical to not only having a credit card but also looking ahead to your future.
Many credit cards come with the added bonus of free consumer protection thanks to Section 75. In a nutshell, under the Consumer Credit Act 1974, credit cards are equally as liable as the retailer or seller when it comes to having issues with goods or services. So, if you use your credit for a purchase or service between £100 and £30,000 and there is an issue, you are protected. Remember that the success of each claim and the financial return is assessed on a case-by-case basis.
Modern technology is giving scammers and fraudsters easier access to our information and more scary, our bank accounts. Having cash stolen from your account is a nightmare and it can sometimes be difficult to get it returned. This is where having credit cards is great — spending that is deemed as out of character on your card will flag an alert. Depending on your credit card issuer, you will receive a call straight away. It happened to me when I was travelling in Brazil and a member of the my card’s fraud team called me to ask if I had just made a $3,000 dollar purchase in Qatar. Because they could see that I had recently used my card in Brazil, I couldn’t possibly have been in Qatar at the same time. The transaction was blocked before it even appeared on my statement.
Often, credit cards are deemed as a bad thing. However, when you consider them, they can be used for good and offer supreme benefits. Of course, not everyone is right for a credit card. But as long as you understand how credit works and consider if a credit card is right for your financial situation, you can be ahead of the game — both with points and miles and with benefits.
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