Why credit can work for you

Last Modified 16th of February 2021

Whilst most people like to stay financially independent, there are times when you need money in advance of payday. For those occasions when you don’t have the money yourself, a credit card can be a highly useful way to borrow necessary money in advance.

Likewise, one of the best ways to improve your credit rating is through a credit card. As such, there are a number of ways they can be beneficial. With plenty of credit cards in the UK to choose from, it’s not a difficult prospect either – if you know what you need from such a card that is!


Revolving credit

Credit cards are typically known as revolving credit. This is because the credit on the related account is in a constant state of flux. Whilst each use adds to the overall loan, you’re also repaying the balance when you can. As such, credit cards can be highly beneficial when you repay what you borrow effectively.

In fact, that’s what the best credit cards out there reward you for. Pay off your balance each month, for instance, and you won’t get charged for the interest. This rewards effective and wise spending, but it also means you aren’t effectively losing any money. If you borrow £100 and pay back £100 when you next get paid, the overall effect is the same. Using this approach, you can make those necessary payments without the fear of facing extra charges.

Other cards, can even reduce the interest over time; in this case, the APR can be decreased by 5% each year for three years, reducing it by a potential 15%. As such, frequent users can be further rewarded if they keep the balance paid. Plan ahead and financial challenges get easier.

Credit rating

Likewise, the opposite of revolving credit is instalment credit. These are the, typically larger loans, which are taken out and paid back, as the name implies, through instalments. Yet these often need a very strong credit rating, which is another reason why you may want to apply for a credit card if you have a less than perfect credit rating.

Revolving credit is easier to apply for and, thanks to being able to borrow smaller amounts to suit your immediate needs, is arguably easier and safer to repay. Of course, it’s still borrowing so it will show up as a successful form of credit on your credit rating. This will improve how creditors view you in the future, potentially lowering the risk they feel you pose and thus helping you achieve a better deal.