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Should I use my credit card or save up in advance?

Borrowing money is an important part of the financial world we live in. There are occasions in life where loans or credit can help you to live your life in the way you want. But every time you borrow money you have to pay it back, plus interest. These repayments can be a financial burden at times. To find out more about interest, have a look at our section and if you are struggling with repayments, why not take a look at our section on 'Dealing with debt'.

Instead of piling all your shopping onto a credit card and paying it off later, have you ever thought about saving up before you need something? Have a go at the exercise below to see how your spending habits can have an impact on the amount of money you end up with.

ACTIVITY: Take a look at the activity below to see the difference between shopping with your credit card and savings.

NOTE: Monthly payments have been rounded up in the activity below to allow you to use our simple loan calculator with this activity.

First, let’s have a look at credit card shopping:
You spend £180 on your credit card. Your credit card company charges an interest rate of 8%. Use our loan calculator to find out how much you would have to pay back every month if you paid back the money over eight months. Also, find out how much you would pay in total.

Have a go at working out how much you would pay with other interest rates.


Now, let’s have a look at saving:
Imagine you aim to save up the £180 that you will need for your Christmas presents. You pay in £15 over 12 months at an interest rate of 3%. Use our savings calculator to find out how much you would save.


Being able to borrow money can be very useful on certain occasions but at other times it eats away at the contents of your wallet. Before you make a decision to use credit, it’s a good idea to explore your options.

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