Are credit cards dangerous?

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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10 Responses to Are credit cards dangerous?

  1. Clare says:

    Definitely a cash girl. Thank god those days are over when you\’d be buying a new top and the person behind the counter would ask if you wanted 20% off with a store card. Loaning people money to buy your goods – isn\’t that what the Mafia does?!?

  2. Clay says:

    Your friend thinks you summed up the issues perfectly. Yes, credit cards are dangerous. If one has the financial means, willpower and sufficient attention to detail to handle them, they can can be a useful tool. If there is any chance that one will carry a balance, except in extreme emergency, they should be avoided. I deeply respect those people who avoid them as a matter of self-discipline.

  3. Clay says:

    One small example of tactical use of credit cards. My dentist has introduced 50p per transaction charge for credit (but not debit) cards. For the nominal check-up fee, of course I use a debit card. When I had more expensive treatment, though, I used a cash-back credit card and reduced cost by a net £2.50. Small frugal victory.

  4. Bill says:

    I have never yet tried a credit card, & see \’em as a posible danger, if the interest changes without notice etc. I did think of putting all vehicle expenses on one, spreading the tax, MOT, complete with any repairs, & Insurance, over a possible 10 months, interest free. Essential food, drink, clothing, & utilities, including \’phone & dial-up laptop could all go on another, but should be cleared every month, interest free.Having suffered once from an unauthorised o\’draft, complete with horrifying interest as also penalty "charges", through no fault of me own, it is possible that a credit card could even protect us from our own bank. Possibly better than being 3 months o\’drawn, without notice, or warning, on a debit card.After 3 years of attempting ter log-in, I still yet have no hope of scrutinising, or controling my a/c online. A & L repeatedly inform me that I have an internet a/c, but have spent 3 years effectively denying me access, fers obvious reasons. They do not allow me ter close the a/c.I still yet have no means of log-in ter me T-mobile (ISP) a/c, as the "\’phone no." is 1 digit too long. They have not sent me a paper invoice for over 12 months.

  5. Bill says:

    Sorry, piper, happy new year, glad ter see yer back!

  6. Flo says:

    Debts can be run up due to circumstances such as job loss, sudden sickness and unexpected disasters. However there are debts which are just keeping up with the people next door or plain spending on things that you honestly can\’t afford. Spending more than you have is nothing new in the history of people but credit cards make it easier to do. Those who are bad with money will run up debts and those who are good with money will do less of it. It seems that banks have made huge provision for writing off credit card repayments that will never happen – There are going to be people who won\’t be able to get credit for some long time yet then. Which means that shopping on the high street will decline and the economy will stagger along then because the economy is built on credit for people to go shopping. If there were no such things as credit cards do you think that people will find other ways to run up debts? I do.

  7. piper says:

    Funnily enough, Clare, the last time I was in New Look the girl behind the counter did in fact ask me if I wanted 10 per cent off by signing up to their card! I was a bit surprised they were still flogging that dead horse. I think that if you can control yourself, credit cards have their place – and Clay\’s example demonstrates this. But the sheer scale of what some people manage to rack up on them is incredible. I know a handful of friends who have managed to wind up owing £30,000 plus on them.

  8. Bill says:

    Years ago, most village pubs had a slate, in full public view, where they kept a record of all debt, to all local regulars. It always had to be paid off, every weekend, normally before the rent etc. was paid. Some were happy with it, others never diid succeed in taking anything home, except mebbe a hangover, ter pay the rent, utilities, etc. with.Those who dissappeared, without clearing their slate, would be given 3 months to return, & fix it. After 3 months, they could return to a clean slate, or not, dependent on the "governor". If a slate were no longer possible, they would have ter pay cash, with order.Sadly, even that did not beat the addiction, but what business person, would refuse to serve their very best consumer?When such business made a small loss, they were doing so at the expense of HMRC, as a first class, completely free insurance policy!Any store, or loyalty card is basically a Red Herring, very few read all that shedload of smallprint first, we just do not have the time, or even the skill to understand it all. The stuff simply contradicts itself so many times over, the more we read, the more confused we become. These firms pay the legal industry extremely good money to stitch us up in advance, with all this gibberish.It is impossible to ascertain the true cost of the card in advance. The basic expense is welll & truly hidden in the cash price of the purchase, which we still yet pay, in full, even without using a card.The card itself is a form of imprisonment, which we volunteer for. It prevents our Freedom of Choice, & Movement, effectively preventing us from voting with our feet.When we are in debt with any utilities, they harrass & intimidate us, with all manner of threats, & oft hand it on to unlicensed bailiffs, who are even worse, & who escalate the debt out of all proportion. We do have a very simple form of redress against these thugs & bullies. If they refuse to listen to us,or to see any form of sense, we can simply vote with our feet, without any form of notice, which leaves them completely unable to cut us off, or mess with any meter, which would oft leave us on an even worse tariff.The exception to this is Water. Absolutely impossible to vote with our feet, as they still yet have a total monopoly in their chosen area, but it is also illegal for em to cut us off, at any point whatever. This means that we have the power to refuse any further payment whatever, until the case has been through the County Court, in our presence, where we have the possibility to speak, in front of an indepent Judge.

  9. caroline says:

    Yes they are piper i dont have any credit cards because they are called drastic plastic

  10. piper says:

    Meant to say – happy new year to you too, Bill and everybody else on the blog!I like it, Caroline – drastic plastic. Very good!

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