Credit cards are loved by some but treated with suspicion by many others. Many people who love them don’t understand how they work and end up in debt while those who treat them with suspicion do so, again, because they do not understand how they work.

True there are disadvantages to having a credit card. However, there are many more advantages to having one. Here we look at some of the advantages and disadvantages of them

Advantages:

1. Free credit. The primary reason behind credit cards and why they are so popular. They provide you with credit so you can purchase something and not have to actually pay for it until a later date. This credit is free if you pay the full amount as and when due.

2. They provide a safe and easy way to pay for things in the UK and abroad. Especially if you are buying things over the phone, by mail order or on the Internet.

3. Purchase protection – under Section 75 of the 1974 Consumer Credit Act, card providers and retailers are required to take joint responsibility for faulty purchases. Hence, if you buy something, valued between ?100 and ?30,000, that turns out to be faulty you are entitled to a refund from the card provider.

4. Fraud protection. If you are a victim of fraud you will not have to pay if a fraudster uses your card.

5. Global acceptance. They are accepted in almost every country in the world. You can use them without having to worry about exchanging for different currencies.

6. Many cards offer incentives such as loyalty points, charity payments or cash back for using your card.

Disadvantages:

1. The big disadvantage of them is that you will be charged interest if you do not repay your balance in full every month. Interest rates vary with different card providers but can be as high as around 20%.

2. They all have a credit limit, which may be less than you expected or hoped for. If you have a poor credit rating or are getting a card for the first time your credit limit may be capped at around ?500. Those with a good credit rating or have been using a card well for a number of years may get a credit limit in the region of ?4,000.

3. I could have and maybe should have included this in the advantages section but a credit card teaches you to manage your finances in a disciplined manner, otherwise you will quickly accrue a large debt.

4. The fees are a disadvantage as they are some of the highest on the market. Fees include for cash advances, late payments as well as the interest rates. Failure to manage your card properly will subject you to these fees, which can quickly make your balance significantly higher.

While there are a few disadvantages to credit cards, there are overwhelming advantages. Careful and disciplined management can eliminate all the disadvantages, leaving you with only the major advantages of having a card. Make sure you compare credit card rates before you pick a card as these can vary significantly between card providers.

Ben graduated with a business and economics degree back in 1998. Following many years service in the financial sectors Ben has turned his attention to helping everyday people with their finances. He has seen first hand how many people struggle with their financial situation primarily due to poor advice and misunderstandings of how money works. His latest venture is a blog that allows users to compare the top credit cards in the UK.