Credit cards vs. loans
Some credit cards give you the option of a 0% interest purchase period which is a cost effective way of borrowing money – you’ll only pay back what you’ve borrowed – sounds good right? But you’ll need to be disciplined and make sure you pay off what you’ve borrowed within that 0% interest time frame and make sure you meet your minimum monthly repayments on time, otherwise interest rates can rocket.
Using a credit card can give you some flexibility in terms of when you pay back the money (as long as you remember to do it before the 0% interest free period finishes) and how much you pay each month, you won’t be saddled with any early repayment fines if you find yourself paying back more to clear the debt earlier.
One big advantage of borrowing on your credit card, is that the purchases you make with it, are protected under the Consumer Credit Act. This means that anything you buy that costs between £100 and £30,000 is covered in the event of the company you bought it from goes bust or if anything goes wrong. This is thanks to Section 75, which states that the credit card company and the supplier are jointly responsible, you can make a claim against them to recover your costs should anything go wrong.
It’s good to know that you don’t have to pay the full amount of an item to get this protection and you don’t have to put a minimum of £100 on your card – it’s just as long as the item itself costs at least £100.