Paying for things with a credit card can be a useful way to build your credit score and spread the cost of your purchases, but it can also provide you with valuable protection if something goes wrong.
Here we outline some of the things you might want to consider buying with a credit card, and what your rights are if you use one.
Remember that if you are paying for goods using a credit card, you should clear your balance as quickly as possible so you don’t get hit by steep interest charges. Find out more about which types of card can help you keep your costs down in our article A simple guide to credit cards.
Big ticket items
If you are planning on spending between £100 and £30,000 on anything, whether that’s a new fridge or a diamond ring, it’s worth considering putting it on a credit card.
When you make a purchase in this price bracket on a credit card, you should be protected by legislation called Section 75 of the Consumer Credit Act. Introduced in the 70s, Section 75 means that the company you bought an item or services from and your credit card company have joint responsibility to protect your money if something goes wrong.
Let’s imagine you buy a TV that turns out to be faulty, if the company you bought it from won’t refund you or has gone bust, your credit company should pay you back. The idea behind this is that you shouldn’t be in debt for goods or services that you never received or that are faulty, so your credit card company has a responsibility to make sure you are protected. As ever, there are exceptions to this rule, so check if you’re covered before you buy anything.
On top of this protection, if you have a credit card which offers you rewards when you spend on it, such as cashback, you could get a decent amount back if you’re making a big purchase.
Online shopping has been around for years, but often you don’t know exactly what you’ll get, or if you’re dealing with an unfamiliar retailer, whether it will turn up at all.
Much like making big purchases, when shopping online, if you buy something over £100 and less than £30,000, you’ll be covered by Section 75 protection. This means you might have an easier time getting your money back if something goes wrong, for example if your purchase doesn’t arrive and you’re having no luck getting in touch with the company that sold it to you.
Using your credit card can also be safer as it can reduce the risk of fraud if you inadvertently hand over your financial details to scammers. If you put your credit card details into a site that turns out to be dodgy and a fraudster tries to use your details, your credit card company won’t usually charge you for it.
Much like online shopping, buying event tickets can be fraught with risk if you’re buying from a site you don’t know well. Using your credit card to pay for them should mean that you’re protected by Section 75 legislation, therefore reducing the chances that you’ll lose your money if they don’t arrive or end up being fake.
Holidays and Travel
Now that the world of travel has pretty much returned to normal, more of us are looking at getting away, and if you’re booking any travel arrangements, it’s worth thinking about using your credit card for this.
The benefits of using your credit card for these purchases are threefold:
- Some credit card companies and travel companies offer rewards points when you use a credit card to make purchases, which can then be redeemed against future travel costs.
- If you pay for anything over £100, and under £30,000, you should be covered by Section 75 protections. It’s important to know that this isn’t an accumulative value, but an individual one. So if you’ve bought three plane tickets that cost £35 each, you wouldn’t be covered as they are below the £100 threshold, but if you bought one for £105, and the flight company went bust before your trip, your credit card provider should provide you with a refund.
- You can spread the cost of your holiday so you don’t have to find a big lump sum to pay for it.
You can read more about this in our article How are holidays protected?
If you’re hiring a car so you can get around on your holidays, car hire companies usually insist that you pay for it on a credit card. This is because they ‘block’ a deposit on the main driver’s credit card when the car is picked up. They hold this against any damage done to the vehicle, or in case the vehicle is stolen and it is only released if the car is returned in the same condition that you picked it up in.
Some credit cards offer special perks if you’re hiring a car, such as an upgrade to a better vehicle, and others may provide protection for theft, damage and liability of the rental car. Check your card small print carefully though, as only some cards offer these benefits.
Car rental companies have a reputation for stinging customers with hefty damage fees, so when you pay with a credit card if the rental company tried to charge you for any damage you don’t agree with, you might be protected under Section 75, making it easier for you to get your money back.
What shouldn’t you use a credit card to pay for?
While you can use a credit card to pay for pretty much anything you like, there are a few things it’s probably best to avoid using your card for if you can, including mortgage or rent payments, repaying other debts, or your essential everyday spending.
If you’re struggling to pay these costs, it could be a sign that you are in financial difficulty, so it might be worth seeking professional help. Lots of people are struggling at the moment, and it’s really important to talk to someone who might be able to help sooner rather than later.
All of the following companies and charities might be able to help you, so don’t be afraid to reach out:
Citizens advice – find your local Citizens Advice or phone (0800 144 8848).
StepChange – You can access their services either online or over the phone (0800 138 1111).
National Debtline – you can contact them through a webchat or phone them (0808 808 4000).
You can also find more information in our article Where to find help if you’re struggling financially.
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