The door-step sellers may still be plaguing us – although thankfully new regulations coming into force mean that they now have to provide us with a written quotation. But one of the few benefits of the recession I’ve noticed is that junk mail from banks and loan companies has eased off. Suddenly these outfits aren’t quite as keen on getting you to take out huge loans or credit cards with them anymore. So I was a bit surprised to receive one from my mobile phone company this week asking me to sign up for their new card. On the plus side, it reminded me about a furious frugal debate me and another moneysaving friend had last week about plastic and how we manage our cash.
The debate was kicked off by a story from homeless charity Shelter last week. The charity commissioned YouGov to carry out a poll asking people if they have recently paid their rent or mortgage using credit cards. The pollsters claim that a million people in the UK have done so and Shelter warned of the perils of paying for a roof over your head with plastic.
If the figures are correct, and people are actually paying their rent or mortgage using money borrowed on a credit card because they are struggling so much in the recession, then it’s deeply worrying. However, my friend says he feels that there is also a lot of anti-credit card propaganda and scaremongering at the moment.
He tells me he pays for his groceries using a credit card because he gets cash-back and loyalty points. He also claims that he can more effectively keep track of his spending this way and he always pays the full balance off each month. I have a female friend who does exactly the same thing. She prefers to rack up her month’s expenses on the card, rather than have money coming out of her current account via a debit card in dribs and drabs, but always pays off the balance each month. She says that this makes her the credit card company’s ‘best and worst customer’.
Are credit cards dangerous per se? I think it depends on the individual rather than the card, although obviously APRs can vary hugely. Personally I prefer to pay for day to day items using cash or my debit card because I prefer to keep my credit card clear for emergencies. In my early twenties, I ran up small debts on plastic and feel that the danger of it is that you don’t have to pay it off immediately. But I don’t think credit cards are a bad thing – they have their place.
After all, it’s a sensible idea to use a credit card to pay for a big ticket item, such as a holiday. Under the 1974 Consumer Credit Act, you are automatically insured on purchases of between £100 to £30,000. If the company goes bust or if the item is faulty you will get your money back. Credit cards are useful to have in case of emergencies. Plus, these days it’s a good idea to use them occasionally to ensure your provider doesn’t decide to withdraw them because you don’t use them regularly enough. I had one of mine withdrawn last year because I hadn’t used it for 12 months.
Other people on this blog have told me they prefer to use cash rather than debit or credit cards because they feel like they’re spending ‘real money’. They say they’re less likely to splash out on items they don’t need because it hurts more to hand over cash than a card. I suppose it’s up to the individual and whether they can trust themselves with the credit card. And after all, you can still rack up debts via a debit card and overdraft and people were getting into debt hundreds of years before credit cards were invented. What can be worrying is the huge scale of the debts some people manage to accumulate on them. What do you think?
Do you prefer to use credit cards to pay for items or do you use debit cards or cash? Do you think credit cards are dangerous? Have you got into debt with them? Leave a message and let me know.
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