Safe and responsible shopping with credit cards

Credit cards can be used to make online and in person purchases by tapping into a revolving line of credit.

Each time a purchase is made on a credit card, the amout of credit available reduces. When a repayment is made, the credit line goes back up. Normally if the entire amount that was borrowed in a given month is paid back in full on time, interest will not be charged. If a balance is carried over to the next month, interest will be charged on the amount carried over. Depending on the card, other fees and charges may apply too.

Credit cards come with potential benefits and risks. It’s important to consider interest, fees, and other associated costs before deciding to apply for or using a credit card. Always read and understand a credit card’s terms and conditions as these may vary depending on the type of card and provider.

This article covers:

• What security measures protect credit card payments online
• Some potential uses and risks associated with credit cards
• Budgeting and credit cards
• Monitoring credit card activity

Keeping credit card payments safe

The Payment Card Industry Data Security Standard, or PCI DSS, is a set of standards merchants must comply with to accept card transactions.

Security measures such as tokenisation, data encryption and secure payment gateways are normally used by merchants to help keep credit card details secure during transactions.

Potential uses for credit cards

Using a credit card responsibly is important. Shopping around for the most suitable card option based on individual needs, staying within the card’s limit, and making repayments on time are a few examples of responsible credit card use.

Potential uses of credit cards include:

• Being able to spread out repayments towards the total cost of an item over time.
• Some cards may offer sign up bonuses or rewards programs. These often come in the form of loyalty points that can be used on things such as upgrading flights or booking accommodation. For example, it’s possible to link a credit card to a PayPal account and still earn rewards points.

Potential risks of credit cards

There are risks that come with using credit cards. Spending beyond one’s means and missing repayments are two examples.

Things to consider when using credit cards:

• If a balance is carried from month to month, interest will be charged (unless transfer balance or other card terms allow).
• Using a credit card for a cash withdrawal will typically come with a fee and higher interest rate.
• Annual fees: These can be higher than fees charged for other payment cards and will vary depending on the credit card provider.
• Surcharges: Some businesses charge a fee to pay with a credit card.
• Late fees: These may be charged when a cardholder doesn’t make a payment on time.

Budgeting with credit cards

It is possible to create a budget for credit card spending and repayments. This could be done by tracking and keeping records of all spending in a given month. Possible ways to do this include tracking bank statements manually or using an app that syncs with the credit card provider.

Having spending records laid out in one place could help to create a realistic budget — one which accounts for their spending habits and credit card repayments. This could help to avoid overspending and accumulating debt.

Monitoring credit card activity

Monitoring credit card activity is an important part of financial safety. Regularly checking card statements and account activity for any unauthorised transactions could help a customer spot potential fraud. If fraud is suspected, credit card providers and credit reporting bodies should be contacted.