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What can I use my credit card for?

Your credit card can be used for many goods and services, but there are some things you should definitely not pay for with a credit card.

A credit card allows you to pay for things similar to the way you might do with a debit card, cash or cheque, however there are some key differences you need to be aware of before making a credit card application.

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Many of these differences should also help you to decide when to use your credit card and when to definitely not use it. Fundamentally, knowing how to correctly use your credit card is important and can be the difference between being badly in debt or earning lucrative rewards.

Read our guide to find out how to make the most of your credit card by using it properly, and how to avoid extra charges and interest.

Differences between credit cards and debit cards

Although there are many similarities between the various forms of payment in terms of how you use it to pay for goods and services, credit cards are altogether very different.

You can use it at the till or online like you might with a debit card, and can use it to withdraw cash too (although you shouldn’t), but credit cards have one major distinction from debit cards.

The money you spend on a credit card, is on credit, i.e. it is money you are borrowing from the credit card issuer or bank, and does not belong to you.

Your debit card pays for things using the money you already have in your bank account, or via your overdraft, depending on your balance and your bank’s overdraft conditions.

When you spend on a credit card, your credit card issuer is paying for the transaction, and they require you to pay that money back.

You can do so in instalments by paying a minimum amount each month with interest added on, or pay it off in full within the interest free period to avoid paying any interest.

It’s always better to pay off the balance in full, as the longer you take to pay it off the more you will pay overall. Our credit card calculator can help you work out how long it will take you to pay off your credit card borrowing.

Most credit cards have a period of around 50 days’ interest free credit, so if you can pay off your balance each month in full, you should be able to avoid having to pay any interest at all.

With a debit card, the money comes almost immediately out of your bank account after you’ve made a payment.

This means that you need to carefully consider whether you can afford to repay the credit card issuer before you make any purchases on a credit card.

Your bank will usually decline any purchase made with a debit card if you don’t have the money in your account, but a credit card won’t, unless you have missed payments and exceeded your spending limit.

Credit cards

What can I use my credit card for?

Just like all other forms of payment, you can use your credit card in exactly the same way, provided that the merchant accepts credit cards as a form of payment.

If you want to shop online, you can enter your credit card details just as you would do with your debit card.

In shops you can use your credit card wherever it is accepted. Some shops may charge a fee for using a credit card, and there are certain business sectors that regularly charge more for using a credit card, such as airlines and hotels, but there are usually some exceptions out there.

You may even benefit from using your credit card at certain locations as many credit cards carry rewards such as long 0% on purchases deals, or rewards to spend at supermarkets or on travel.

The key difference though, when using a credit card, is that there might be consequences that you will need to consider with certain purchases. Read on to see what you should not use your credit card for.

What should I not use my credit card for?

Many airlines and travel booking agents, online or in-store may charge a small fee for using a credit card instead of a debit card or cash. You may even find that small local shops might charge extra for using a credit card instead of cash or debit cards.

This is mainly because many credit cards carry a higher fee to businesses processing the transaction.

A very small percentage gets taken off the transaction and is paid to the bank by the business you’re shopping with. This does not happen when paying with cash.

Some businesses try to get around this by passing on the fee to customers paying with a credit card, and sometimes even with a debit card, which also carries a fee marginally smaller than credit cards.

If you can afford to pay with cash, then it’s generally better to avoid the fees.

However, if, say, you have an airline rewards credit card, and the flights you are booking carry a small credit card surcharge, then you might consider it to be worth the fee if you’re going to receive enough reward points for another holiday.

So it’s best to weigh it up properly before parting with your money. However, the most important thing to remember is to never use your credit card to withdraw cash.

Credit card cash withdrawals

If there is one thing you should definitely avoid doing with a credit card, it’s using it to withdraw cash. As a simple rule, only ever use your debit card to withdraw cash.

Credit card cash withdrawals charge you interest from the moment you take the money out of the machine.

From then on, you will be charged the daily rate of interest until you have paid it back in full. You may also get charged a fee for the withdrawal as well.

This is considered to be the equivalent of buying money with your credit card, so credit card issuers will charge you a high price for doing so.

Perhaps more important to remember is that the rules and charges on credit card cash withdrawals are not only limited to cash machines.

Cash withdrawals are considered to be anything where you are using your credit card to, essentially, buy money.

This includes using your credit card to buy your money from the foreign exchange, or even buying chips or gaming money in a casino or on a gambling website, because they are used to get back more money.

Vouchers to be redeemed on products and services are always fine to buy with a credit card however, unless that voucher would be redeemed on actual money like in a casino.

There isn’t an extensive list of every type of transaction which could be considered a credit card withdrawal, so just remember, that if it looks like your credit card issuer might see it as you buying money then it’s best to avoid it and use a debit card or cash instead.

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