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Understanding the Advantages (And Disadvantages) Of Credit Cards

Credit cards are one of the most popular payment methods for all sorts of purchases, from daily groceries to high value items, like cars. 

In total there are an estimated 60 million credit cards in the UK. And, according to a recent Forbes Advisor poll, more than two thirds of Brits have at least one credit card. That’s still significantly less than the roughly 106 million debit cards in the country.

But the numbers don’t lie. Credit cards have a number of advantages over debit cards that make them a favoured payment method for millions of consumers. In this article we’ll list and explain all of the advantages and disadvantages of credit cards so you can weigh up whether they’re the right option for you.

The difference between credit cards and debit cards

First, let’s quickly outline the differences between credit cards and debit cards. Debit cards have a sort code, while credit cards don’t, and each card type is clearly labelled with ‘debit’ or ‘credit’. But, apart from these small differences, credit cards and debit cards are physically pretty much the same.

It’s when you look under the hood at how they facilitate transactions that the differences become apparent.

Debit CardCredit Card
Funding methodWithdraws funds from your personal bank accountTakes funds from a line of credit
Eligibility requirementsBank account holderA minimum credit score and often minimum yearly salary
Additional costsOverdraft fees, foreign transaction feesA long list of credit card fees, including APR, late payment fees, overlimit fees, cash withdrawal fees, etc.
Accepted for paymentAccepted by most merchantsWidely accepted but less so due to additional merchant fees 

Credit card advantages

Credit card advantages

Now let’s look at the advantages of credit cards for normal consumers. There are a number of risks associated with credit cards, which we’ll get into later. But, provided you stay on top of repayments and manage your spending properly, credit cards can be a great addition to your wallet (or digital wallet).

Rewards and points

Perhaps the most well known and frequently advertised feature of credit cards is the rewards and benefits they offer users. Each card provider offers a unique list of benefits to attract customers and encourage them to pay with their credit card.

Credit card rewards programs give cardholders points every time they use their credit card to pay. Points are typically awarded per pound you spend, with higher points rates for specific purchase types, etc.

What these points get you varies from provider to provider. They can often be used to pay for rooms with partner hotel chains, for shopping at select supermarkets, or redeemed as miles to pay for airline tickets.

In fact, credit cards are a great choice for people who travel. Between airport lounge membership, extra points for purchases abroad, free travel insurance and better foreign currency rates, many people use credit cards specifically for their travel-related benefits.

Convenience & purchasing power

Convenience is another big selling point of credit cards for many consumers. Credit cards access a line of credit from your credit provider, rather than funds from your bank account. This means you’ve effectively paying with your provider’s money in the short term.

Depending on your credit limit, this may mean you’ll have access to more money than have in your bank account. In the UK, the average credit card limit is just £2,500 to £4,000. However, this limit is all dependent on your credit score. It’s possible to get a much higher limit, and ready access to a lot more credit, if you’re creditworthy.

You’ll incur charges whenever you exceed your credit limit. But, as long as you’ll have the funds to pay off your bill at the end of the month, credit cards can be a useful option for making payments mid-month.

Moss Corporate Cards
for all expenses

Payment protection and security

Another major benefit of credit cards is additional payment protection. Section 75 of the Consumer Credit Act (1974) gives credit card providers equal responsibility with sellers for any purchase above £100 and below £30,000.

This means that you may be eligible for a refund from your credit card provider in some circumstances:

  • A company that you have purchased from goes into administration before you’ve received your item or a refund. This includes airlines/airline tickets and travel agents.
  • An item you’ve purchased doesn’t arrive, arrives and is broken or faulty, or arrives but isn’t as described.

In these cases you can file a Section 75 claim with your credit card company, provided you’ve followed the standard refund and complaints procedure with the vendor. Your card provider will ask for receipts to support your claim.

Like debit cards, credit cards can also be used for chargebacks if you suspect you’ve been a victim of financial fraud or abuse. Chargebacks allow your credit card company to reclaim funds from a merchant’s bank account. But you should only apply for a chargeback if you’re certain you meet the criteria. You may not be guaranteed a refund if your claim is rejected, and, although chargebacks can’t affect your credit score, your company will add them to your credit record.

Building credit history

Finally, credit cards are an essential tool for building your credit score. Not only is a good credit score important for getting good rates on credit cards, it also helps you get better rates on mortgages and bank loans.

Advantages of credit cards for businesses

Advantages of credit cards for businesses

Most of the benefits consumers enjoy when using credit cards also apply to businesses. Instead of using normal credit cards, businesses use corporate credit cards which are intended specifically for business-related transactions.

Corporate credit cards typically come with much higher credit limits, which means they’re perfect for paying suppliers and general business expenses quickly. Like normal credit cards, business credit cards also offer businesses various perks when they spend money, typically in the form of cash back. Additionally, business credit cards can help businesses build their credit history and increase their eligibility for business loans.

Some modern business credit cards are also supported by spend management software which allows you to monitor and control the money that’s being spent on your cards. This software helps businesses with financial reporting, cash flow management and speeding up accounting processes.

Credit card disadvantages

Credit card disadvantages

Now that we’ve covered the advantages of credit cards, let’s move onto the disadvantages. It’s a shorter list, but the downsides can be much more damaging if you don’t regulate your spending and stay on top of your credit card balance.

Credit card fees

Credit cards come with an extensive range of additional fees and additional charges. Most of these charges are unavoidable if you use a credit card, like standard APR interest on an unpaid balance. Others are tacked onto your credit card bill if you spend outside the scope of your normal credit card agreement. This includes cash withdrawal fees and late payment fees.

Fees are how credit card companies make money, so you’ll always encounter them in some form or another. But, as long as you’re crystal clear about when and how you can face credit card fees, you can limit their impact on your wallet.

Moss Corporate Cards
for all expenses

Spiralling debt

Failing to stay on top of your credit card repayments can quickly lead to spiralling debt. Because of the way that interest charges compound over time, you can end up owing significantly more than the amount charged to your card at checkout.

Research by Moneyfacts Group revealed that average UK credit card APR hit a new record high of 30.4% earlier this year. With this APR, making £300 monthly repayments on a credit card balance of £3,000 credit card balance, you’d end up paying £434 in interest. That’s not taking into account the various additional fees you’d be charged.

High overspending potential

On the flip side of more purchasing power, credit cards also have a much higher risk for overspending. Debit cards are limited to the money you have in your bank account and, besides overdrafts, you can’t spend more than you have.

Credit cards, on the other hand, are tied to a credit line. In this sense credit cards can give a false sense of security. It’s also why people with a spending addiction are at much higher risk of going into debt with a credit card.

How to pick the right credit card

How to pick the right credit card

Picking the right credit card provider all comes down to what benefits are most important for you. If your main priority is keeping your costs down, you should prioritise a card with low APR and minimal fees. If you’re picking a credit card for travel, you’ll want a travel credit card with favourable fees and rewards for spending abroad.

As we mentioned before, your personal credit score will be the main deciding factor in getting a good credit card. To build a good credit score, you need to pay your debt on time and limit the number of credit cards you apply for.

Moss corporate credit cards

Moss corporate credit cards

Moss allows businesses to simplify their corporate spend with a variety of powerful spend management solutions. Get better spend visibility, free your accounting teams from tedious, time consuming tasks, and save money across multiple different departments with more efficient money management.

With Moss corporate credit cards, you can give each and every employee or department their own card. They can use their Moss card via Apple Pay and Google Pay to buy team drinks, office supplies or any other employee expense that you offer in your expense policy. You can even set up cards specifically for monthly recurring marketing expenses, or one-off cards for high value purchases.

It’s possible to give each Moss card its own custom budget limit and track it directly via the Moss app. You can even set up notifications to warn you when a specific card is reaching its spend limit, and alter the limit on the go if you need. Moss corporate credit cards come with up to £2.5 million credit per month and attractive repayment terms to match your business requirements.


What are the main advantages of paying with a credit card?

The main benefits of paying with a credit card are additional payment protection, and easier access to funds. Credit cards take money from your credit card provider, instead of your bank account.

What are the main disadvantages of paying with a credit card?

it’s much easier to find yourself going into debt when using a credit card because they money you’re using isn’t yours, and you’re charged significant additional fees as a result.

Do credit cards work in the same way as debit cards?

Physically, credit cards and debit cards work in exactly the same way. You can use them online, at an ATM to withdraw cash, or in-store at a card payment terminal. It’s also possible to get virtual versions of credit cards which you can use for virtual card payments.

How do credit card rewards work?

Credit card rewards are one of the biggest selling points of credit cards. Generally, credit card providers will reward customers with rewards points for every pound they spend on their credit card. These points can be redeemed in exchange for things like airline tickets or accommodation.

How do you get a credit card?

After checking your credit score to see which credit cards you’re eligible for, simply fill out an online application for the credit card of your choice. Once you’ve been approved your credit card provider will send your credit card to you in the post.

Henry Bewicke
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