Money Issues - Different types of credit - pros and cons

Credit cards

Advantages	Disadvantages
Some credit cards give you extra protection. For example you may get insurance on things you buy. Nearly all credit cards offer up to 59 days interest-free credit, as long as you repay what you owe on the card in full, within a set number of days.	If you take out cash on a credit card, you will usually be charged interest immediately. The annual interest rate you pay on credit cards can be high. Some credit cards will charge you for transferring your balance from one card to another. If you don’t repay the balance on the card each month, interest will usually be charged straight away. Credit cards are not a good idea for long-term borrowing.

Advantages

Disadvantages

Some credit cards give you extra protection. For example you may get insurance on things you buy.

Nearly all credit cards offer up to 59 days interest-free credit, as long as you repay what you owe on the card in full, within a set number of days.

If you take out cash on a credit card, you will usually be charged interest immediately.

The annual interest rate you pay on credit cards can be high.

Some credit cards will charge you for transferring your balance from one card to another.

If you don’t repay the balance on the card each month, interest will usually be charged straight away.

Credit cards are not a good idea for long-term borrowing.

Store cards

Advantages	Disadvantages
Store cards work in the same way as credit cards. Some store cards also offer discounts on things you buy in store.	It may make sense to use a store card to get a discount on something you were going to buy anyway, but it’s usually not suitable for long-term borrowing. Just like credit cards, store cards can get very expensive if you don’t repay the balance every month.

Personal loans

Advantages	Disadvantages
A personal loan from a bank, building society or other financial institution can help you balance your budget because you know how much you have to repay each month. You usually make repayments over an agreed period of time (anything from 6 months to 10 years).	The interest rate you pay on a loan (APR), varies according to the amount of the loan and the period of time agreed for repaying it. Shop around for the best deal. If you take out a new personal loan to repay an old one, you may be charged an early-repayment fee, and these fees can be high.