Understanding the advantages of a credit card
Credit cards can offer real advantages – like increased buying power, cashback and purchase protection – while also helping you spread costs or build your credit score.
They can be a smart way to manage your finances and even earn rewards. But it’s important to understand the potential downsides, such as fees and debt. Here’s a clear look at the pros and cons to help you decide if a credit card is right for you.
Estimated read time: 3 mins
What are the advantages of a credit card?
Our range of Vanquis Credit Cards can do different jobs for you. Get help with everyday spending, clearing a balance, building your credit score – or a bit of everything. And you can check if you’ll get accepted without affecting your credit score. Here’s a summary of the advantages of having a credit card…
Building your credit score
Paying your credit card on time shows you can manage credit well, which can boost credit ratings, and may make it easier to get approved for things like loans, vehicle finance or mortgages.
Clearing a balance
Paying off your credit card balance is a great way to stay in control of your finances and avoid unnecessary credit card interest.
Clearing what you owe quickly means you’ll save money, free up your credit limit, and keep your credit score healthy. While making the minimum payment is always an option, paying more helps you clear your balance faster.
Before you apply, check any fees and interest rates, and have a plan for how you’ll repay your spending so you can enjoy the flexibility without the extra cost.
Build credit history
Paying off your credit card in full and on time each month is one way to build a strong credit history.
A good credit record can make it easier to get approved for future borrowing, like loans or mortgages, and may even help you secure better deals on everyday things like mobile phone contracts and vehicle finance.
Managing your card well shows lenders you’re a responsible borrower, which works in your favour. Just keep in mind that missed payments or overspending can harm your credit history and make it harder to access credit later – so staying on top of repayments is key.
Making larger purchases
Credit cards can make big purchases easier to manage by allowing you to spread the cost rather than paying everything upfront.
This flexibility is helpful for planned expenses like furniture or holidays, as well as unexpected costs. Just make sure you have a clear repayment plan so you can avoid interest and keep your finances on track.
Protection on purchases
One of the biggest advantages of using a credit card is the extra protection it offers under Section 75 of the Consumer Credit Act.
If you use your card to pay for something costing more than £100 and up to £30,000, your credit card provider is legally jointly liable with the retailer. This means if the item doesn’t arrive, turns up faulty, or the seller goes bust, you can claim your money back through your card provider.
Even paying just part of the cost on your credit card – like a deposit – gives you full protection for the entire purchase.
Get security with credit card protection
Credit cards don’t just offer flexibility – they also provide extra security when you shop. Most cards include fraud protection, so if your details are stolen or someone makes unauthorised transactions, you won’t be left out of pocket.
Help with emergencies
When life throws you an unexpected expense – like a boiler breakdown or urgent car repairs – a credit card can give you quick access to funds without dipping into your savings.
This flexibility can help you manage the cost and spread repayments over time, giving you breathing space when you need it most.
Earning cashback
Many credit cards offer cashback on your everyday spending. It’s a simple way to make your money go further – whether you’re buying groceries, paying bills or booking travel.
Some cards even offer higher rates for certain categories like dining or fuel. To maximise your rewards, use your card for regular purchases and pay off the balance in full each month so you avoid interest and keep the cashback as a genuine benefit.
Should I get a debit card or credit card?
Understanding the difference between a credit card and a debit card can help you choose the right tool for your spending.
A credit card allows you to borrow money and pay it back later – either in full or through monthly instalments – making it ideal for building your credit score, earning rewards or adding protection to larger purchases.
In contrast, a debit card draws money directly from your current account, which can help you avoid debt and stick to a budget.
What are the potential disadvantages of a credit card?
Damage to credit score from late payments: Late or missed payments can negatively impact your credit score, making it harder to access credit in the future. They’re recorded on your credit report for up to six years, which could damage your credit score and limit access to future credit.
Risk of debt from missed payments: Missed credit card payments can quickly lead to financial strain. Even a single late payment can trigger fees, the loss of promotional 0% interest offers and higher interest charges. Persistent missed payments can lead to defaults or County Court Judgments.
The best way to avoid this risk is to pay on time – ideally in full if affordable – or at least more than the minimum each month. Setting up a direct debit and budgeting carefully can help prevent missed payments and keep debt under control.
Cash withdrawals: Using your credit card for cash withdrawals often comes with additional fees and higher interest rates. It’s important to understand these costs before withdrawing cash.
Interest rates and fees: Credit cards can include annual fees, foreign transaction fees, and varying APRs. Make sure you check these before applying.
How to choose the right credit card for you
Decide what type of card you need – Whether it’s a purchase card for everyday spending, a rewards card for perks or a balance transfer card to manage existing debt.
Think about where you’ll use it – If you’re travelling abroad, look for a card with low or no foreign transaction fees.
Know what you can afford – Only borrow what you can repay each month and try to keep your credit utilisation under 50% of your limit.
Check interest-free periods – Some cards offer 0% interest for a limited time but relying too much on your credit card or only making minimum payments each month can lead to growing balances and higher costs later. You can also sometimes get 0% on purchases or balance transfers for a set time, but rates will rise once the offers end.
Watch out for extra charges – Rewards and cashback cards can come with annual fees, so make sure the benefits outweigh the costs.
Make sure the debt is affordable – Compare the cost of borrowing on a credit card with alternatives like a personal loan.
Check your credit score – Improving your credit score can help you qualify for better deals.
Understand how rates work – The advertised APR isn’t guaranteed – the rate you get depends on your credit history and personal circumstances.
Learn more on how to choose the right credit card for you.
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