The Benefits of Credit Cards
When used correctly, credit cards can offer several benefits, including financial protection, rewards schemes, and a boost to credit scores. Before you apply for a credit card, it’s important to understand how they work and how they can help you, and make sure you’re aware of the risks involved.
Spread the cost of purchases
Credit cards allow you to borrow money and make purchases right away. This means you can make purchases without being limited by the available funds in your bank account. You can then spread the cost and pay it back over a period of time. Just make sure you’ll have enough money to pay off that purchase in future instalments, and any interest you may be charged.
Spending in emergencies
Unexpected events happen, and they can be expensive. Damage to a car, a failed boiler in winter, a sudden leak in your roof. These can all be costly issues that need to be dealt with fast. And if you don’t have the funds in your regular budget to cover the expense in one go, a credit card can be a useful way to pay for it upfront.
Interest-free period
If you pay off your credit card balance each month, you won’t have to pay interest on that month’s spending.
Some lenders offer promotional periods where you won’t pay interest on purchases or balances you transfer for a set time from taking out the card. Although you may still be charged if you've taken out cash using your credit card.
Protection on purchases
This is an often overlooked benefit of credit cards, but it’s a key one. If you make a purchase with your credit card and the item you buy is broken, faulty, or not as described—or you buy it online and it never arrives—your credit card offers protection and can help you get your money back.
In most cases, the business that sold you the item will refund you. But if not, you may be able to claim your money back through your credit card provider. If you used your credit card to buy the item, Section 75 of the Consumer Credit Act allows you to claim back the money from your credit card provider.
The purchase needs to meet certain criteria to qualify for protection under Section 75 – more details of which can be found in our handy guide.
Build your credit history
Potentially, the most important long-term benefit of using credit cards sensibly is that it can help build your credit history and credit score.
Your credit history is a record of all the loans and credit you’ve applied for and been approved for, as well as how you’ve used and repaid that credit. Various businesses and organisations, like mortgage lenders, can access your credit history via a credit report to judge whether or not you have a history of responsible borrowing and if you’re a low or high-risk customer to give credit to.
Being accepted for a credit card, paying off your balance each month, and having a credit utilisation rate of around 30% can all improve your credit report and credit score1. It shows that credit card providers are willing to lend to you and that you can borrow that money responsibly.
It’s important to understand that if you don’t manage your credit card well – if you don’t pay off your balance, your credit utilisation rate is high, and you miss repayments – you can damage your credit history, which can make it difficult to borrow money in the future.
Learn more about how to build your credit score with an Asda Money Select Credit Card.
(Representative 34.9% APR (variable))18+, UK resident, credit subject to status.
At Asda Money, we’re here to help
Credit cards can be confusing. But we aim to demystify them to help you understand more about choosing, applying for, and using your credit cards. Take a look at our Credit Card Jargon Buster for clear and straightforward explanations of credit card terminology.
Our Asda Money Credit Cards offer plenty of advantages. Alongside the benefits of credit cards mentioned above, you’ll benefit from Asda Rewards. Plus, our credit cards can be used with mobile wallets, such as Apple Pay and Google Pay. And you can manage your card easily with our Asda Money Credit Card app.
Asda Stores Limited (registered address: Great Wilson Street, Leeds, LS11 5AD) trading as Asda Money, acts as a credit broker not a lender and is authorised and regulated by the financial Conduct Authority. Asda Stores Limited only offers credit cards issued by Jaja Finance Ltd (registered address: 27 Old Gloucester St, Holborn, London, WC1N 3AX). Credit issued subject to status. Applicants must be aged 18 or over and UK resident. For full terms and conditions please visit asda.com/creditcard.