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The UK has become a nation of credit card lovers, with the ability to apply online making it even easier to gain access. Whilst accumulating too much debt is never a good thing, the popularity of the credit card may, to some extent, be indicative of a move towards more intelligent borrowing and debt management.

It is true that the majority of credit cards and store cards charge a higher rate of interest than most banks and building societies charge on their loans. So why do we continue to choose credit cards over other forms of credit? Well, the first reason is that they are often easier to apply for and to acquire than a bank loan. Secondly, they can be much more flexible. For example, if you have a lot of other things to pay out for one month, all you have to do is pay your minimum monthly amount (usually between 3% or 5% of the full balance). Although it is not recommended that you continue to only repay the minimum amount, this can be useful way of coping at financially demanding times.

Credit cards also offer more flexibility in terms of the money you borrow. You do not have to apply to the card provider each time you want to use it, whereas a loan requires you to do just that if you need to borrow more money. In addition to these advantages, the items you purchase with your card are also insured, providing they cost between £100 and £30,000. So if, for example, the item is faulty or damaged and the supplier will not accept responsibility, the credit card company is required by law to cover the costs. This protection does not apply to goods paid for with a regular debit or store card.

All of the above benefits have been around for years, but credit cards companies have now started to introduce even more appealing benefits to consumers. One of the most popular and successful incentives is the interest-free deal on balance transfers. The idea is that cardholders transfer the money they owe onto a new credit card, upon which they do not have to pay any interest for a set period of time. The card issuers benefit through new custom, and begin to make money as soon as the deal ends and interest is payable. However, many customers have wised up to this, and simply move on to a new card every time the promotion ends. In effect, this is like having a long-term loan at 0% interest.

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