macro photograph of a chip and pin credit card

Benefits and disadvantages of a credit card

Weigh up whether a credit card is right for you with our comprehensive list of pros and cons.

Credit cards can be a convenient way to manage your finances, but they can also be expensive and risky. If you’re deciding whether or not a credit card is right for you, here are 15 of the main benefits and disadvantages you can weigh up to make your decision.

If you’re wondering whether a credit card is a good fit for you, you can also use our lists of the types of people credit cards are suited (and not suited to) to help make the right choice.

9 Benefits of using a credit card

The perks that come with paying on plastic include:

  • 1. A credit card is safer than carrying cash.
    While there’s only a small chance of having lost or stolen cash returned, a credit card can quickly be cancelled if you lose your wallet. Most financial institutions also have security processes in place to protect you if your card has been lost or stolen or if you suspect your account has been used for a fraudulent transaction. If you’re in any of these situations, make sure to contact your bank to report the issue as soon as possible.
  • 2. A credit card can build your credit rating.
    Your credit card account details and payment history make up a key part of your credit report. Provided you keep your account in good standing, this information will help you build up a good credit score, increasing your chances of approval for other products such as car loans or a mortgage.
  • 3. You can get interest-free days.
    Provided you pay the balance in full before the statement period ends, many credit cards will offer a set number of days where you won’t pay interest on purchases. That can make a credit card a much smarter prospect than regularly dipping into your overdraft. Other, specialised cards go further – offering 0% interest for a number of months, allowing you to spread the cost of significant purchases.
  • 4. Earn reward points when you spend.
    Rewards and frequent flyer credit cards allow you to earn reward points on every pound you spend on eligible purchases, such as groceries and petrol. Redeem the points with the lender’s rewards programs for perks including flights, products from the rewards store or cashback.
  • 5. You can request a refund if you’re unhappy with a product or service.
    Thanks to Section 75 of the Consumer Credit Act, 1974, you can request a chargeback through your credit card company if your purchase is faulty, not as described, or does not arrive, and the merchant refuses to refund the money or has gone bust.
  • 6. Credit cards work in any currency.
    Although currency conversion fees usually apply, it’s super-easy to use your Visa or Mastercard credit card abroad to make purchases in a foreign currency. There are even tailored credit cards that waive fees for international purchases – which could be useful if you often shop at overseas online stores or have an overseas holiday coming up.
  • 7. Credit cards give you an emergency line of credit.
    Credit cards can be a financial safety net if you don’t have enough cash or savings to cover any unexpected costs that arise. Remember that you have to repay everything you owe, though.
  • 8. Credit cards often have complimentary extras.
    Credit card features such as travel insurance, purchase protection and extended warranty insurance can save you money and give you peace of mind. Other value-adding features include complimentary flight offers, airline lounge passes and even free wine when you dine.
  • 9. You can consolidate debts and save money on existing balances.
    Balance transfer credit cards allow you to move existing high-interest debts to a new account with a low or 0% promotional interest rate. This can save you money on interest charges and help you clear debt faster.

It’s also worth noting that, until recently, businesses often applied a surcharge when you paid with a credit card. Thankfully this is no longer allowed

6 Disadvantages of using a credit card

The downsides of spending with a credit card include:

  • 1. Paying high rates of interest.
    If you carry a balance from month-to-month, then depending on the card you’ll be charged interest. The default interest rates can be painfully high, and can vary depending on the type of transaction (cash advances or transfers to other accounts, for example, are often charged at a higher rate than purchases) so you can end up paying hundreds or thousands more than you might have, if you only make the minimum required repayment each month. Like your home energy, mobile contract and mortgage, if you don’t keep you eye on the ball and compare and switch from time to time, you’re likely to spend much more than you need to.
  • 2. Credit damage.
    Missed credit card repayments and ongoing debts are recorded on your credit file and can impact your chances of getting a loan in the future.
  • 3. Credit card fraud.
    There are a range of fraud schemes that target credit cards. While you can be compensated for illegal transactions on your account, dealing with credit card fraud can still be a time-consuming and stressful experience.
  • 4. Cash advance fees and rates.
    Financial institutions make it very expensive to use your credit card to get cash out or make other “cash equivalent” transactions (such as buying foreign currency or gambling). Using a credit card for a cash withdrawal will attract a cash advance fee worth around 3% of the total transaction amount. It also typically attracts an interest rate of 18-22% right away.
  • 5. Annual fees.
    While you can often get cards without annual fees, many credit cards do have them. These can cost as little as £25 per year, or several hundred pounds, depending on the card that you choose. Generally, the more perks you want, the higher the cost of the annual fee. If you want to avoid this charge, you can consider a no annual fee credit card – but make sure you look at all the other features to help find a card that works for you.
  • 6. Other fees can quickly add up.
    Depending on your card, you could be charged fees when you miss a payment, fees if you spend past your credit limit, fees for overseas transactions, balance transfer fees and even some rewards programmes fees. If you carry a balance or don’t have access to interest-free days, there’s also a good chance interest will be applied to these charges.

Crucially, credit cards are a “revolving line of credit”. That means they can theoretically last a lifetime, because they don’t have an end date. Taking out a credit card is an ongoing commitment, so it’s worth doing a little homework before diving in!

Credit card advantages and disadvantages

Should I apply for a credit card?

blondy-with-laptop-holding-a-creditcard copy

Credit cards are suited to certain types of people, and certain circumstances, but not others. As well as considering the pros and cons, you may like to look at the following factors to help decide if a credit card is right for you.

A credit card may suit you if you

  • Are at least 18 years of age
  • Are a UK resident
  • Have a regular source of income
  • Regularly pay your bills on time
  • Want to keep certain transactions separate from your everyday bank account
  • Want to build your credit history
  • Are keen to earn rewards for your spending
  • Need a more flexible cashflow
  • Can afford to pay a little extra for the convenience

A credit card may not suit you if you

  • Don’t meet the typical eligibility criteria
  • Often struggle to pay bills on time
  • Don’t have a regular source of income
  • Don’t want the hassle of having to compare and switch from time to time
  • Can’t afford annual fees or interest charges
  • Have bad credit
  • Are happy to just use a debit card

Different types of credit cards explained

Compare credit cards

Comparison ordered by representative APR with affiliated products shown first.
Updated March 25th, 2019
Name Product Purchases Annual/monthly fees Credit limits Rep. APR Incentive Representative example
9.9%
£0
Min. limit £500, max. limit not specified.
9.9%
Earn 5,000 bonus Membership Rewards® points when you spend £500 in first 3 months of Card membership. Earn 1 Membership Rewards® point for every £1 spent thereafter.
Representative example: When you spend £1,200 at a purchase rate of 9.9% (variable) p.a., your representative rate is 9.9% APR (variable).
0% for 6 months reverting to 19.9%
£0
Min. limit £500, max. limit not specified.
19.9%
Double points on spend in M&S for first 12 months (2 points per £1). Then earn 1 point for every £1 spent at Marks and Spencer's and 1 point or every £5 spent elsewhere. 100 points = £1 reward voucher. Points will be converted into reward vouchers 4 times a year.
Representative example: When you spend £1,200 at a purchase rate of 19.9% (variable) p.a., your representative rate is 19.9% APR (variable).
0% for 6 months reverting to 19.9%
£0
Min. limit £500, max. limit not specified.
19.9%
Earn 1 point for every £1 spent at Marks and Spencer's and 1 point or every £5 spent elsewhere. 100 points = £1 reward voucher. Points will be converted into reward vouchers 4 times a year.
Representative example: When you spend £1,200 at a purchase rate of 19.9% (variable) p.a., your representative rate is 19.9% APR (variable).
0% for 20 months reverting to 19.9%
£0
Min. limit £500, max. limit not specified.
19.9%
Earn 1 point for every £1 spent at Marks and Spencer's and 1 point or every £5 spent elsewhere. 100 points = £1 reward voucher. Points will be converted into reward vouchers 4 times a year.
Representative example: When you spend £1,200 at a purchase rate of 19.9% (variable) p.a., your representative rate is 19.9% APR (variable).
19.9%
£0
Min. limit £100, max. limit not specified.
19.9%
Earn Asda vouchers every time you shop - 1% cashback on all Asda spend, 0.2% on all other transactions and 10% on selected insurance products. Once £2.5 is earnt a voucher can be downloaded to spend in Asda stores.
Representative example: When you spend £1,200 at a purchase rate of 19.9% (variable) p.a., your representative rate is 19.9% APR (variable).
0% for 18 months reverting to 22.9%
£0
Min. limit £500, max. limit not specified.
22.9%
Earn 1 Membership Rewards® point for every £1 spent.
Representative example: When you spend £1,200 at a purchase rate of 22.9% (variable) p.a., your representative rate is 22.9% APR (variable).
22.9%
£0
Min. limit £500, max. limit not specified.
22.9%
Earn 10,000 bonus Membership Rewards® points when you spend £1K in first 3 months of Card membership. Earn 1 Membership Rewards® point for every £1 spent thereafter.
Representative example: When you spend £1,200 at a purchase rate of 22.9% (variable) p.a., your representative rate is 22.9% APR (variable).
22.9%
£0
Min. limit £700, max. limit not specified.
22.9%
5,000 Avios when you spend £1,000 within 3 months of account opening. Earn 1 Avios for virtually every £1 spent. Spend £20K in 12 months and get 2 for 1 travel when redeeming Avios for a BA reward flight. Earn up to 90,000 bonus Avios points per calendar year, 4,000 points per friend/family member that successfully applies for an American Express card (Excl. Basic card) and uses the Referral Programme.
Representative example: When you spend £1,200 at a purchase rate of 22.9% (variable) p.a., your representative rate is 22.9% APR (variable).
22.9%
£0
Min. limit £700, max. limit not specified.
22.9%
Earn up to £150 additional bonus cashback per calendar year. £20 per friend/family member that successfully applies for an American Express card (Excl. Basic card) and uses Referral Programme. The cashback rebate is not payable in respect of any month in which the minimum payment is not received by the due date.
Representative example: When you spend £1,200 at a purchase rate of 22.9% (variable) p.a., your representative rate is 22.9% APR (variable).
19.9%
£3 per month
Min. limit £100, max. limit not specified.
26.2%
Earn Asda vouchers every time you shop - 2% cashback on all Asda spend, 0.2% on all other transactions and 10% on selected insurance products. Once £2.5 is earnt a voucher can be downloaded to spend in Asda stores.
Representative example: When you spend £1,200 at a purchase rate of 19.9% (variable) p.a. with a fee of £3 per month, your representative rate is 26.2% APR (variable).

Compare up to 4 providers

Updated March 25th, 2019
Name Product Purchases Balance transfers Annual/monthly fees Rep. APR Incentive Representative example
0% for 27 months reverting to 19.9%
0% for 27 months reverting to 19.9%
£0
19.9%
Free access to your Experian Credit Score.
Representative example: When you spend £1,200 at a purchase rate of 19.9% (variable) p.a., your representative rate is 19.9% APR (variable).
0% for 20 months reverting to 19.9%
0% for 20 months reverting to 19.9%
£0
19.9%
Earn 1 point for every £1 spent at Marks and Spencer's and 1 point or every £5 spent elsewhere. 100 points = £1 reward voucher. Points will be converted into reward vouchers 4 times a year.
Representative example: When you spend £1,200 at a purchase rate of 19.9% (variable) p.a., your representative rate is 19.9% APR (variable).
0% for 18 months reverting to 22.9%
N/A
£0
22.9%
Earn 1 Membership Rewards® point for every £1 spent.
Representative example: When you spend £1,200 at a purchase rate of 22.9% (variable) p.a., your representative rate is 22.9% APR (variable).
0% for 6 months reverting to 19.9%
0% for 20 months reverting to 19.9%
£0
19.9%
Free access to your Experian Credit Score.
Representative example: When you spend £1,200 at a purchase rate of 19.9% (variable) p.a., your representative rate is 19.9% APR (variable).
0% for 6 months reverting to 19.9%
0% for 29 months reverting to 19.9%
£0
19.9%
Enjoy free ongoing access to your Experian credit score (conditions apply) plus exclusive savings on live events with Barclaycard Entertainment.
Representative example: When you spend £1,200 at a purchase rate of 19.9% (variable) p.a., your representative rate is 19.9% APR (variable).
0% for 6 months reverting to 19.9%
0% for 28 months reverting to 19.9%
£0
19.9%
Earn 1 point for every £1 spent at Marks and Spencer's and 1 point or every £5 spent elsewhere. 100 points = £1 reward voucher. Points will be converted into reward vouchers 4 times a year.
Representative example: When you spend £1,200 at a purchase rate of 19.9% (variable) p.a., your representative rate is 19.9% APR (variable).
0% for 6 months reverting to 19.9%
0% for 6 months reverting to 19.9%
£0
19.9%
Double points on spend in M&S for first 12 months (2 points per £1). Then earn 1 point for every £1 spent at Marks and Spencer's and 1 point or every £5 spent elsewhere. 100 points = £1 reward voucher. Points will be converted into reward vouchers 4 times a year.
Representative example: When you spend £1,200 at a purchase rate of 19.9% (variable) p.a., your representative rate is 19.9% APR (variable).
0% for 6 months reverting to 19.9%
0% for 27 months reverting to 19.9%
£0
19.9%
Free access to your Experian Credit Score.
Representative example: When you spend £1,200 at a purchase rate of 19.9% (variable) p.a., your representative rate is 19.9% APR (variable).
0% for 28 months reverting to 19.9%
0% for 18 months reverting to 19.9%
£0
19.9%
Earn cashback when you shop online with over 500 top brands with Virgin Money Back.
Representative example: When you spend £1,200 at a purchase rate of 19.9% (variable) p.a., your representative rate is 19.9% APR (variable).
0% for 28 months reverting to 19.93%
0% for 28 months reverting to 21.93%
£0
19.9%
Representative example: When you spend £1,200 at a purchase rate of 19.93% (variable) p.a., your representative rate is 19.9% APR (variable).

Compare up to 4 providers

Updated March 25th, 2019
Name Product Balance transfers Balance transfer fee Purchases Rep. APR Incentive Representative example
0% for 28 months reverting to 19.9%
0.99% (min. £5) for 3 months reverting to 2.9% (min. £5)
0% for 6 months reverting to 19.9%
19.9%
Earn 1 point for every £1 spent at Marks and Spencer's and 1 point or every £5 spent elsewhere. 100 points = £1 reward voucher. Points will be converted into reward vouchers 4 times a year.
Representative example: When you spend £1,200 at a purchase rate of 19.9% (variable) p.a., your representative rate is 19.9% APR (variable).
0% for 20 months reverting to 19.9%
2.9% (min. £5)
0% for 20 months reverting to 19.9%
19.9%
Earn 1 point for every £1 spent at Marks and Spencer's and 1 point or every £5 spent elsewhere. 100 points = £1 reward voucher. Points will be converted into reward vouchers 4 times a year.
Representative example: When you spend £1,200 at a purchase rate of 19.9% (variable) p.a., your representative rate is 19.9% APR (variable).
0% for 29 months reverting to 19.9%
1.99% for transfers in first 60 days
0% for 6 months reverting to 19.9%
19.9%
Enjoy free ongoing access to your Experian credit score (conditions apply) plus exclusive savings on live events with Barclaycard Entertainment.
Representative example: When you spend £1,200 at a purchase rate of 19.9% (variable) p.a., your representative rate is 19.9% APR (variable).
0% for 20 months reverting to 19.9%
0% for transfers in first 60 days
0% for 6 months reverting to 19.9%
19.9%
Representative example: When you spend £1,200 at a purchase rate of 19.9% (variable) p.a., your representative rate is 19.9% APR (variable).
0% for 12 months reverting to 19.9%
3% (min. £3)
19.9%
19.9%
Earn Asda vouchers every time you shop - 1% cashback on all Asda spend, 0.2% on all other transactions and 10% on selected insurance products. Once £2.5 is earnt a voucher can be downloaded to spend in Asda stores.
Representative example: When you spend £1,200 at a purchase rate of 19.9% (variable) p.a., your representative rate is 19.9% APR (variable).
0% for 27 months reverting to 19.9%
1.5% for transfers in first 60 days
0% for 6 months reverting to 19.9%
19.9%
Representative example: When you spend £1,200 at a purchase rate of 19.9% (variable) p.a., your representative rate is 19.9% APR (variable).
0% for 27 months reverting to 19.9%
2.7% for transfers in first 60 days
0% for 27 months reverting to 19.9%
19.9%
Representative example: When you spend £1,200 at a purchase rate of 19.9% (variable) p.a., your representative rate is 19.9% APR (variable).
0% for 15 months reverting to 19.9%
3% (min. £3)
19.9%
26.2%
Earn Asda vouchers every time you shop - 2% cashback on all Asda spend, 0.2% on all other transactions and 10% on selected insurance products. Once £2.5 is earnt a voucher can be downloaded to spend in Asda stores.
Representative example: When you spend £1,200 at a purchase rate of 19.9% (variable) p.a. with a fee of £3 per month, your representative rate is 26.2% APR (variable).
0% for 12 months reverting to 15.9%
0% for 3 months reverting to 2.4% (min. £5)
0% for 12 months reverting to 15.9%
15.9%
Representative example: When you spend £1,200 at a purchase rate of 15.9% (variable) p.a., your representative rate is 15.9% APR (variable).
0% for 12 months reverting to 17.9%
0% for 3 months reverting to 2.4% (min. £5)
0% for 12 months reverting to 17.9%
17.9%
Customers will be able to earn commission-free purchases abroad by using their Credit Card each time they make a purchase in Sterling. The calculation will be based on a 5:1 ratio - for example, £5 spent in Sterling will earn an allowance of £1 commission free-purchases abroad. Purchases abroad beyond the earned amount will be charged 2% commission.
Representative example: When you spend £1,200 at a purchase rate of 17.9% (variable) p.a., your representative rate is 17.9% APR (variable).