The short version: Credit cards are useful for two things: spreading the cost of large planned purchases interest-free (using a 0% purchase card), and getting strong consumer protection on purchases over £100 via Section 75 of the Consumer Credit Act. They are not useful for covering a shortfall in your income — that’s when they become expensive debt. The average credit card interest rate in the UK in 2026 is around 27%, with representative APRs often exceeding 30%. Used with a plan and cleared in full each month, a credit card can actually work for you. Used without one, it will work against you.
Credit cards get blamed for a lot. Debt, overspending, the feeling that money is disappearing with nothing to show for it.
But the card isn’t the problem. It’s a tool. And like any tool, it’s useful when you know what it’s for — and potentially damaging when you don’t.
I spent ten years in financial services, including at Barclaycard. Here’s an honest look at when credit cards earn their place in your wallet — and when they don’t.
What is Section 75 protection and why does it matter?
Section 75 of the Consumer Credit Act 1974 makes your credit card provider jointly liable with the retailer if something goes wrong with a purchase. If you buy something and the company goes bust before delivering it, op the goods are faulty and the seller won’t respond — your credit card provider is legally required to help you get a refund.
This applies to purchases between £100 and £30,000. It doesn’t matter if you only put £1 on the card — as long as the item or service costs over £100, you’re covered for the full amount.
Debit cards do not offer this protection. PayPal, bank transfers, and cash don’t either. This alone is a strong reason to use a credit card for large planned purchases — flights, appliances, holidays — provided you pay the balance in full immediately.
When are credit cards genuinely useful?
- Large planned purchases with Section 75 protection. Book a holiday or buy a fridge on your credit card, then clear the balance immediately when the statement arrives. You get the protection, pay no interest.
- Spreading cost with a 0% purchase card. If you need to buy something you can’t cover in one go, a 0% purchase card lets you spread the payments over 12–24 months interest-free. You need a clear payoff plan.
- Building your credit score. Using a credit card for regular small spending — then paying it off in full each month — builds a positive payment history and improves your credit score over time.
- Cashback or rewards (only if you clear in full). Some cards give cashback or points on spending. These are only worthwhile if you never carry a balance — the interest on any balance wipes out the rewards immediately.
When are credit cards a bad idea?
- Covering a shortfall in your income. If you’re using a credit card because you’ve run out of money before the end of the month, the card isn’t solving the problem — it’s borrowing from next month and charging you for the privilege.
- Emergencies you haven’t planned for. A credit card can paper over a crisis, but at an average rate of around 27% APR in 2026, it’s expensive papering. This is what an emergency fund is for.
- Buying things you haven’t thought about. The ease of tapping a credit card makes impulse purchases frictionless. If you haven’t budgeted for it, a credit card is the worst way to buy it.
How expensive is credit card debt, really?
Let’s make it concrete. The average credit card interest rate in the UK in 2026 is around 27% APR. Representative APRs — the advertised rate that applies to at least 51% of approved applicants — are often higher still.
| Balance | Monthly minimum (approx.) | Interest at 27% APR | Time to clear paying minimum only |
|---|---|---|---|
| £500 | ~£12 | ~£11/month | Many years |
| £2,000 | ~£48 | ~£45/month | Over a decade |
| £5,000 | ~£112 | ~£112/month | The balance barely moves |
Paying only the minimum on a credit card is designed to keep you paying interest indefinitely. It is not a repayment plan. It is the opposite of one.
What’s the rule for knowing which category you’re in?
One question: could you clear this balance in full from your current account right now? If yes — the credit card is working for you, giving you protection and potentially rewards. If no — you’re paying for the privilege of spending money you don’t yet have, at 27%+ per year.
George’s story: the same card, two very different outcomes
George, 30, has had the same credit card for four years. In years one and two, he used it to cover the gap between his salary and his spending — carrying a balance of around £1,200 month to month and paying the minimum. He was spending roughly £30 a month purely in interest.
In year three, he sorted his spending plan, built a small buffer, and paid the balance off. Now he uses the same card for his monthly food shop and one subscription, clears it in full every month by direct debit, and gets a small amount of cashback. He hasn’t paid a penny of interest since.
Same card. Completely different relationship with it.
The M&G System: do this this week
- If you’re carrying a balance, stop using the card for new spending today. Calculate what you owe and what you’d save by switching to a 0% balance transfer deal. Run the numbers using the free Debt Calculator.
- If you clear in full each month, check whether your card offers cashback or rewards. If it doesn’t, there may be a better card for how you spend — but only look at this if you’re certain you clear in full every month.
- Set a direct debit to clear the full balance each month. Not the minimum — the full amount. This is the one habit that separates people who benefit from credit cards from people who pay for them.
If you want to see exactly where credit card debt fits into your overall financial picture, use the free Financial MOT at moneyandgrowth101.com/tools/. It takes under ten minutes.
And if you’re not sure whether you’re in the “credit card working for me” camp or the other one — book a free Money Clarity Call. 20–30 minutes, no pressure, just clarity.
Two ways to go further
If you would rather have the whole thing in order instead of one post at a time, that is what the book does.
Money & Growth 101 — the no-fluff UK guide to clearing debt and building real wealth.
Prefer to talk it through first? A Money Clarity Call is 20–30 minutes, free, and there is no pressure either way.
Frequently asked questions
Does Section 75 apply to contactless and digital wallet payments?
Yes, as long as the underlying card is a credit card. It doesn’t matter whether you tapped your phone, used a physical card, or paid online — if the purchase was charged to a credit card and meets the £100–£30,000 threshold, Section 75 applies.
Is chargeback the same as Section 75?
No. Chargeback is a Visa/Mastercard scheme that applies to debit and credit cards and covers purchases under £100 as well. It’s not a legal right — it’s a voluntary scheme run by the card networks. Section 75 is a legal right under UK law that covers credit cards only (for purchases £100–£30,000). Section 75 is the stronger protection; chargeback is a useful backup for smaller amounts or debit card purchases.
What’s the difference between a credit card and a charge card?
A charge card must be paid in full each month — there is no option to carry a balance. A credit card allows you to carry a balance (subject to a minimum payment) and charges interest if you do. American Express offers both. Most UK cards are credit cards.
Can I have more than one credit card?
Yes. Many people have two — one for Section 75 protection on larger purchases, and one for balance transfers. Having multiple cards isn’t inherently bad. Carrying balances on multiple cards simultaneously is. If you have more than two, ask yourself honestly whether each one is serving a specific purpose.
Do credit cards affect my chances of getting a mortgage?
Yes, in both directions. A credit card cleared in full each month improves your credit score and shows responsible credit use, which helps mortgage applications. A credit card with a large outstanding balance increases your overall debt-to-income ratio and can reduce the amount a lender will offer you. Clear balances before applying for a mortgage if at all possible.
Related reading: How to Actually Use a 0% Balance Transfer Card · The 3 Debts to Clear First (and Why) · The Truth About Buy Now Pay Later
Mustafa Alsoodany is the founder of Money & Growth 101. By day he’s worked in financial crime and compliance at banks and fintechs — JPMorgan, Monzo, Starling and Barclaycard among them — and holds the ICA Advanced Certificate in Anti-Money Laundering at Distinction. He started Money & Growth 101 to do the opposite of the day job: make money plain, jargon-free and genuinely doable for people in their 20s and 30s who were never taught it.