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Credit card spending is rising – when could one be right (or wrong) for you?

Did you know we made 2.5 billion different purchases on credit cards in 2014, worth a staggering total value of £145 billion? That's the same as the GDP (Gross Domestic Product) of the Republic of Ireland.

Last year saw an 8% increase in the number of credit card purchases in the UK, according to figures from the British Bankers Association (BBA).

The BBA's December report on High Street Banking also showed there were 34 million active credit card accounts last year, meaning those who have one used it on average of 74 times in 2014.

That's a huge number of us who use them for all sorts of purchases, but is that good or bad thing? If a credit card is the only way you think you can get by, the signs are already there that it’s a bad idea. However, if you’re careful with your money there are some benefits.

Credit cards are a bad idea if…

  • You’re not in a strong financial position. Spending on a credit card can make it hard to budget and ultimately push you into debt. This could cost you more than your original spend
  • You can’t pay off the balance on your statement. Failing to pay off the full amount means you’re liable to pay any interest on your outstanding balance, and not making minimum repayments will mean you‘ll face further charges and interest. This can quickly spiral and push you into debt.
  • You’ve got a bad credit rating. You need a decent one to get a credit card. Applying without a decent rating can damage your rating further.

Credit cards can be a good idea when…

  • You know you can pay off the full amount each month and avoid interest charges.
  • You are spending over £100 on an item. Putting a purchase on a credit card may mean you are offered some additional protection if the seller goes bust or you’re in a dispute with them.
  • You need to spread the cost. A 0% purchase credit card allows you to delay full repayment of your purchases for a limited period. You still have to make the minimum repayments each month, but you won’t get charged interest on the balance. Make sure you have a suitable plan for repaying the full amount at the end of the offer or you will be charged interest at the card’s standard rate.
  • You’re able to earn cashback on your purchases. Say the card offers 1% cashback – every time you spend £1 you’ll get 1pence. This can add up very quickly.

What do you think?

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