Credit Cards Working Detail

Credit card offer a convenient way of borrowing and when used properly they can provide flexibility and a range of useful benefits for the cardholder.

However, with hundreds of different cards to choose from, how do you know which is right for you? This guide aims to guide you through the credit card maze and help you identify the deal that is most suitable for your needs.

How do credit cards work?

Credit cards offer a convenient and secure payment method as well as a flexible borrowing facility.

This guide aims to guide you through the credit card maze and help you identify the deal that is most suitable for your needs

When you pay for something using a credit card, the provider is effectively lending you the money. Every month you receive a statement which detaiall the transactions made. You then have a certain amount of time to make a payment. If you repay the balance in full, no interest is charged.

What are the advantages and disadvantages?

• full by the due date shown on your statement.Credit cards offer a safe and convenient way to pay for goods and services both in the UK and abroad, particularly if you are purchasing over the internet, phone or by mail order.
• Purchase protection - under Section 75 of the 1974 Consumer Credit Act card issuers and retailers take joint responsibility for faulty purchases, If you pay for something with a credit card, valued between £100 and £30,000, that turns out to be faulty or which you do not receive because the company goes bust, you can claim a refund from the card provider.
• Protection against fraud — if you are the innocent victim of fraud you will not be expected to pay if a criminal uses your card.
• Incentives for using a card such as loyalty points and cash back, or payments to support a charity.
• A truly global currency, as credit cards are accepted in virtually every country around the world.

Credit cards offer a convenient and secure payment method as well as a flexible borrowing facility

Disadvantages:

• You will incur interest if you are unable to repay your balance in full every month. Interest rates vary significantly so if you can’t afford to clear your debt you should look for a card that offers a competitive rate of interest.
• The amount you can spend on a credit card is capped so you may not have access to as much money as you expected. Limits of between £300 and £500 are common for those who have never had access to credit before, while those with a good history who have shown that they use cards responsibly are likely to be offered a higher credit limit. That said, because of the credit crunch and rising levels of bad debt, providers are now more cautious about the amount they will lend. So even if you have a good track record with managing credit, you may be offered a significantly lower limit if you apply for a new card.