There are many practical reasons to use a credit card. Unlike debit cards, a credit card can help you to build up your credit score, provided you are responsible with making repayments. You can also make large purchases with the peace of mind that payment protection provides and even earn rewards with some cards.

But it can still be confusing to understand exactly why you should opt for paying with a credit card, as well as getting a clear picture of your repayment terms and obligations. We look at the main benefits of paying with a credit card and some other important things to be aware of.

Credit cards provide you with purchase protection on single items costing more than £100 and up to £30,000. This is thanks to legislation known as Section 75, Consumer Credit Act, 1974. What this means is that if something goes wrong with a qualifying purchase, your card provider can be held jointly liable with the retailer.

This includes if a product doesn’t arrive or if it’s faulty and the company refuses to issue you a refund, or if a company goes out of business. On this last point, a good example is if you book a holiday and the hotel or airline you book with goes bust. In this kind of situation, credit card purchase protection offers you financial peace of mind that a debit card doesn’t.

Credit card vs debit card: which should you pay with?

For larger, riskier or credit-building purchases, a credit card can offer more protection, while a debit card is often used for small, routine spending where you simply want the money to leave your account and stay gone. Both sit in the same wallet and both tap on the same card reader, but they behave very differently once something goes wrong or once you want the payment to work harder for you.

The table below sets out how the two compare on the features that matter most when you are deciding which card to reach for at the checkout.

When a credit card is the better choice

A credit card may offer protection on anything costing £100 or more, where Section 75, Consumer Credit Act, 1974 makes the lender jointly liable with the retailer. The same logic applies to online orders from unfamiliar sellers, flights and package holidays, furniture and appliances bought months before delivery, and any booking where you hand over a deposit long before you receive the goods. Credit cards are also the practical option for hotel and car hire deposits, and a well-chosen travel card can beat a standard debit card on foreign transaction fees.

When a debit card makes more sense

A debit card is the sensible default for everyday spending you have already budgeted for - the weekly shop, fuel, a coffee, a bus fare. Because the money leaves your account straight away, there is no balance to track and no risk of a bill arriving that you cannot cover. Debit cards are also the right choice for cash withdrawals, which are one of the most expensive things you can do with a credit card, and for anyone who knows that an available credit limit tends to become an excuse to spend.

One caveat runs through all of this: a credit card only pays off if you clear the balance in full each month. Rewards, cashback and protection are quickly wiped out by interest charges, so if you cannot repay what you spend, the debit card is the cheaper card every time.

2. Building your credit score

Making timely monthly repayments on purchases you make with your credit card can help you to strengthen your credit score. From applying for car finance to taking out a mortgage, a stronger credit score may mean lenders see you as lower risk and offer you more competitive rates.

3. Interest-free purchases

Most leading credit card providers offer interest-free periods to pay back what you spend. This means you can avoid interest on purchases, as long as you repay the balance in full by each due date. In comparison, most overdrafts - another popular credit option - carry considerable interest charges.

Interest-free periods tend to be either for a set number of days each month but they can also be for a period of continuous months. For instance, a card provider might offer a 12-month interest-free period when you sign up. This can be especially useful for big purchases that you want to repay in instalments over a number of months.

Next step: Compare purchase credit cards today.

4. Credit card-exclusive rewards and cashback

Some credit cards offer you rewards and even cashback when you pay for something. Popular cards reward you for travel bookings or making everyday purchases like the weekly food shop or your morning takeaway coffee. There are also credit cards that offer cashback rewards, typically anywhere from 1% to 5% on your buys. So it can quite literally pay to use a credit card frequently instead of your debit card.

Next step: Find and compare rewards credit cards without harming your credit score.

5. Nice add-ons and complimentary extras

Many credit cards now come with additional perks. These can include travel, medical and home insurance; airport lounge and VIP area access; no or low fees on foreign exchange transactions; and a wide range of others. These additional features can help provide peace of mind and, in the case of extras like airport lounge access, nice little luxuries to look forward to.

The drawbacks of paying with a credit card

Credit cards carry real costs and risks alongside their advantages, and knowing where they bite is what keeps the benefits worth having. These are the main drawbacks to weigh up before you make a credit card your default way to pay.

• Interest charges if you don't clear the balance. The moment you carry a balance past your interest-free window, the annual percentage rate applies - and typical credit card APRs sit far above what you would pay on most other forms of borrowing. A 2% cashback reward is meaningless next to a typical UK credit card APR of around 24.9% charged on the same purchase.

• Minimum repayments that stretch debt out for years. Paying only the minimum, typically around 1% to 2% of the balance plus interest and charges, keeps your account in good standing but barely dents what you owe. A balance of a few thousand pounds repaid at the minimum can take well over a decade to clear and can cost more in interest than the original spending.

• Fees that don't show up in the headline rate. Cash withdrawals usually attract a fee of around 3% and start accruing interest immediately, with no interest-free period at all. Add late payment fees, over-limit fees, non-sterling transaction fees of around 2% to 3% abroad, balance transfer fees and annual fees on premium cards, and the running cost can climb quickly.

• Damage to your credit score. Missed payments are the single biggest killer of credit scores - one missed payment stays on your credit report for six years and outweighs almost anything else you do. Running a consistently high balance against your limit hurts too; UK credit reference agencies generally suggest keeping credit utilisation below around 30%. Making several applications in a short space of time leaves a cluster of hard searches that lenders read as a sign of financial strain.

• The temptation to overspend. A credit limit is not income, but it can feel like a buffer. Because the money doesn't leave your account at the till, it is far easier to lose track of what you have spent than with a debit card - and easier still to treat next month's problem as a problem for next month.

• Not every purchase is protected. Section 75 applies to single items between £100 and £30,000, so anything below that threshold, or bought through certain third-party payment processors, may fall outside the cover you were relying on.

None of this makes credit cards a bad way to pay. It makes them a way to pay that rewards planning. Set up a direct debit for the full balance, keep your spending well inside your limit, avoid cash withdrawals altogether, and check your credit score regularly - checking on ClearScore won't affect it - so you can see the effect of your habits. Do that and you collect the protection, the rewards and the score-building without paying for the privilege.

Making credit card repayments the right way

While using a credit card provides you with these five great benefits, it’s important to be responsible with your repayment obligations to enjoy them to their fullest.

When you use a credit card, you’re basically using the card provider’s money to make purchases which you then have to pay back. It’s generally once a month that you make a repayment.

You usually have two options when making repayments. One, you can usually choose to make the full repayment of what you have spent with your credit card that month. Two, you can make the minimum repayment that your credit card provider requests. If you make the full repayment within an interest-free period, you pay back exactly what you spent with your credit card. If you opt to only make the minimum repayment, you will be charged interest, and the balance will take far longer and cost more to clear.

Your credit card provider should let you know from the outset of your contract with them what interest terms you’d be subject to. If not, be sure to clarify this when looking for a credit card provider as well as the interest-free period that you can take advantage of. The most important thing, though, is to make at least the minimum payment on time. Late payments can negatively affect your credit score. Better still to make full repayment if you can, so you don’t incur any interest charges.

Next step: Compare credit cards with ClearScore (a credit broker, not a lender) today.

ClearScore is a credit broker, not a lender, and works with a range of lenders and other credit brokers rather than exclusively with one.

How to choose the right credit card for the way you pay

Deciding which credit card to choose starts with what you actually want the card to do, not with which provider's name you recognise. Card types are built around distinct jobs, and picking a card designed for a different job is the most common reason people end up paying interest or fees they didn't expect.

Match the card type to your goal

If you are planning a big purchase and want to spread the cost, a purchase card gives you an interest-free window on new spending - often between six months and around two years depending on the deal and your credit profile. If you are already carrying a balance elsewhere and paying interest on it, a balance transfer card moves that debt to a 0% period, usually for a one-off fee of a few per cent of the amount transferred. If you clear your balance in full every month, a rewards or cashback card turns spending you were doing anyway into points, air miles or money back. If you travel often, a travel card built for low or no non-sterling transaction fees will save you far more than a cashback card that charges 3% on every purchase abroad. And if you have a thin or damaged credit file, a credit-builder card offers a small limit and a high rate, which is fine so long as you use it lightly and repay in full - its purpose is the payment record, not the borrowing.

Look past the representative APR

Under FCA rules, the representative APR only has to be offered to at least 51% of successful applicants, so the rate you see advertised is not necessarily the rate you get. It also tells you nothing about the parts of a deal that often cost more in practice: the balance transfer fee, the annual fee, the cash withdrawal charge, the foreign transaction loading, and - most importantly - what happens the day a promotional period ends. A 0% offer that reverts to a high standard rate is only a good deal if you have a realistic plan to clear the balance before the switch. Work out the monthly repayment needed to get to zero within the promotional window before you apply, not afterwards.

How your credit score shapes what you're offered

Lenders price credit according to risk, so your credit score influences which cards you may be offered - alongside other factors lenders consider, such as your income, existing borrowing and whether repayments are affordable. The strongest promotional deals, the longest 0% periods and the most generous rewards cards generally go to people scoring in the Soaring high band (725+), with well-established, clean credit histories. If your score isn't there yet, it is usually worth spending a few months improving your credit score before applying for a headline deal, rather than collecting rejections that leave hard searches on your file.

Use eligibility checks so comparing doesn't cost you

A useful way to compare credit cards is through an eligibility checker that runs a soft search. A soft search indicates how likely you are to be accepted for a given card without leaving a footprint that other lenders can see, though acceptance still depends on the lender's own final checks, including affordability. A full application triggers a hard search, which is visible on your report for a year or more and counts against you if several appear close together. Comparing widely with soft searches and applying narrowly is the pattern that protects your score.

Does a rewards or annual-fee card pay for itself?

Do the arithmetic before you commit. Take your realistic annual spending on the card, apply the cashback or rewards rate, deduct the annual fee, and check whether the remainder is genuinely better than a good no-fee alternative. Also check the ceilings - many cashback cards pay a higher introductory rate for the first few months, cap the amount you can earn each year, or exclude categories such as cash-like transactions. A premium card with lounge access and travel insurance can be excellent value if you fly regularly and would otherwise buy that cover separately, and poor value if you don't. Compare credit cards with the numbers from your own spending, not the example figures in the advert.

Paying with a credit card: your questions answered

What is the 2/3/4 rule for credit cards, and does it apply in the UK?

The 2/3/4 rule is an informal guideline from the US market describing how some issuers limit approvals: no more than two new cards in 30 days, three in 12 months and four in 24 months. It is not a UK rule and no British lender publishes anything like it. That said, the underlying principle travels well - UK lenders do look at how many applications you have made recently, and a run of hard searches in a short period makes you look like you are urgently seeking credit. Spacing applications out by at least three to six months is sensible here.

What is the biggest killer of credit scores?

Missed and late payments. Your payment history carries more weight than almost any other factor, and a single missed payment can stay on your credit report for six years, visible to every lender who searches it. Defaults and County Court Judgments do more damage still. After payment history, the biggest drags are high credit utilisation - using most of your available limit - and a cluster of credit applications in a short space of time.

Is it better to cancel unused credit cards or keep them open?

In most cases it is better to keep an old, unused card open, provided it has no annual fee. Closing it removes its credit limit from your total available credit, which pushes up your utilisation ratio, and it can shorten the average age of your accounts - both of which can nudge your score down. The exceptions are cards with a fee you aren't getting value from, or a card you know you will be tempted to overspend on. If you keep it, make a small purchase occasionally so the provider doesn't close it for inactivity.

Can you really improve your credit score in 30 days?

You can make measurable progress in a month, but you cannot rebuild a damaged file that quickly. Quick wins include registering on the electoral roll, paying down balances to reduce your utilisation before your statement date, correcting errors on your report and adding any missing accounts. The things that move the needle most - a long run of on-time payments and the ageing-out of past problems - take months or years. Be sceptical of anyone promising a specific score by a specific date.

Does Section 75 cover purchases made through PayPal or a third party?

Not reliably. Section 75 requires a direct debtor-creditor-supplier link between you, your card provider and the retailer, and routing the payment through a third-party processor can break that chain. Where cover is unavailable, you may still be able to use the voluntary chargeback scheme through your card provider, though chargeback offers weaker protection and has time limits. For a high-value purchase, paying the retailer directly on your credit card is the safer route.

Is it worth paying with a credit card for small everyday purchases?

It can be, on two conditions: you have a cashback or rewards card, and you clear the balance in full every month. Regular small purchases repaid on time also produce exactly the steady, well-managed activity that helps build your credit score. If there is any chance of carrying a balance, the interest will outweigh the rewards several times over and a debit card is the better choice.

Does using a credit card abroad cost more than a debit card?

It depends entirely on the card, not the card type. Many standard credit and debit cards apply a non-sterling transaction fee of around 3%, but specialist travel credit cards charge nothing on overseas spending and give you Section 75 protection on qualifying purchases at the same time. Whichever card you use, always choose to be billed in the local currency rather than accepting the merchant's conversion, and avoid withdrawing cash on a credit card because of the separate fee and immediate interest.