Getting a credit card can be a nervy prospect. If you’ve always treated them with a healthy degree of respect, you might feel a little anxious at the thought of all that ‘free money’. Will the repayment costs be huge? Can you resist the temptation to spend when times are tight?

When you take on a credit card and treat it with responsibility, you’ll soon discover it can be a life-changing asset. There are numerous perks and benefits available which will help you save money – and keep your finances looking rosy.

Improving your credit score

If you want to be offered the best financial deals, from phone contracts to mortgages, it’s vital that your credit score is as high as it can be.

Credit cards allow you to boost this, as they can illustrate that you’re capable of taking on short-term loans and paying them back in a timely manner. Even though maxing out your card may damage your credit score, if you’ve never borrowed before, this can also work against you. Lenders aren’t able to look at your record and see you’re capable of honouring a repayment plan.

Your credit score will improve if you can show that you can use your credit card for small purposes and that you’re able to pay it off in full at the end of every month.

Cashback

Use your credit card wisely, and you could enjoy earning cash rewards for spending. Some cards will pay you a small percentage of what you spend, tax-free, which is usually added to your account once a year.

Buyer beware – this doesn’t mean that you can go crazy, and buy everything in sight! It’s also worth remembering that you need to pay off your bill in full every month, or the interest you end up paying will swallow any extra cashback you make.

Discounts and savings

If you travel a lot or you have a shop you use several times a week, such as Sainsbury’s or Tesco, a branded credit card may offer discounts and offers with that shop or company.

Airline-branded credit cards are a favourite for frequent fliers, as two perks include discounted flights and reduced prices at airport shops and cafes.

Protection if you lose your wallet

The odds of you finding a lost wallet are already pretty slim – and the chances of you also finding any cash you had it in are next to nothing. However, if your wallet is stolen (worst case scenario) and your cards are used fraudulently, you’re entitled to legal protection.

Once you’ve reported this crime to your bank, they are then obliged to refund you for any fraudulent payments immediately – unless they have evidence there is a reason to refuse you.

Emergency money if you ever need it

If you’re someone who only carries around the cash you think you’ll need to last you through the day, credit cards are great if you find your plans changing. They’re a lifesaver if you find yourself stranded late at night and you need a hotel room, or you need to book a train ticket or a flight at the last minute. You don’t need to worry about having the cash to pay – it’s an instant solution to any curveballs life might throw your way.

However, there are times when you absolutely, definitely should NOT use your credit card. Here are three of them:

  • Paying for holiday money. If you need to get foreign currency before you jet off, never, ever pay by credit card! You’ll be charged a cash advance fee, most card providers will also charge you a whopping great APR, and you won’t get an interest-free period, even if you pay the money back straight away. The same applies for gift cards and vouchers!
  • Paying by credit card cheque. The good news is that credit card providers aren’t allowed to send credit card cheques out any more. The bad news is you may have one lurking at home in a drawer; more unnecessary temptation. Shred them, bin them, and go about your business.
  • Withdraw cash. You’ll have to pay a fee as well as a higher APR, and you can kiss goodbye to your interest-free period. Plus, these transactions also make it you’re your credit report, and they don’t show you in a positive light, as they signal potential financial distress.