I don't use a credit card, and whenever I have cause to speak to anyone at my bank, Lloyds, they try to encourage me to get one and use it instead of my debit card.
As you can imagine, repeated advertising in my face of something I don't want, gets annoying.
Today I told the young man who was trying to sell a credit card that I do not want one because I never get into debt.
He replied that someone who uses a credit card doesn't get into debt if they "pay it off".
Surely this is misselling? EVERY use of a credit card involves getting a LOAN.
I've noticed that there's a widespread belief among younger people that you're not in debt unless the debt collectors are banging on your door or a creditor has taken you to court.
I wonder which companies might have spread this idea round, eh?
So would there be any mileage in taping this kind of 'advice' from banks and causing a scandal, does anyone think?
However, having a credit card can be useful as there can be legal protections as a result of using it.
True. You borrow the money for a short time. But there is a difference between "safe" and "unsafe" debt. If you afford to pay back the amount and can afford the cost of borrowing you don't need to worry.
Because they make a lot of money from debt.
Borrowing small amounts of money on 0% interest and paying back quickly is about the safest kind of debt there is.
Well, technically of course you are borrowing the money from when you buy something until you pay the CC bill so, in that sense, you are right and you are incurring debt.
However, I think most people's definition of "getting into debt" would include something about incurring debts which they cannot afford to pay off.
I use credit cards for most of my purchases, both for convenience and for the protection which it gives for some transactions. I *never*[1] withdraw cash on a CC and always pay each bill in full by direct debit. I never buy anything with a CC for which I couldn't afford to pay cash. I certainly don't consider that I'm getting into debt.
[1] With one exception - and that's getting money from my Halifax card when abroad, because there are no transaction fees and the small amount of interest which I have to pay is less than other cards' transaction fees.
Roger Mills wrote in news: snipped-for-privacy@mid.individual.net:
I am beginning to think that perhaps this is how most people think nowadays. In Britain, that is.
My wife heard someone on the radio say they had a mortgage for 25 years but have only recently got into debt!
So you take out a loan to buy food, and then at the end of the month when sufficient money is in your account, you pay off the debt? If so, how is this more convenient than using a debit card to pay from actual positive funds, assuming you have these in your account before the end of the month?
We don't actually use it for food - my wife uses a debit card! But we could. I use it for things like fuel, clothes, internet purchases, etc. It is convenient because I only have to make sure once a month that there's enough money in my bank account to pay the DD. With a debit card, the money comes out straight away so you need to monitor it constantly.
The other advantage which you ignored is the protection whereby, for purchases over £100, the credit card company is jointly liable with the supplier. So, if a supplier goes broke after you have paid for but not received something, you can get your money back from the credit card company. This does *not* apply if you use a debit card.
A lot of people won't have credit cards for fear of being tempted to use them to buy things they can't afford or - worst still - to borrow cash. I can understand that. Maybe you are like that? The important thing is always to be the master of the card, never its slave!
I have two credit cards that I use for my monthly expediture, both are paid off in full every month and inccur no interest. One is a cashback card and earns me anything up to £100 in year. The other is a card from a Supermarket that earns me vouchers I can spend.
So both cards are in effect paying me to use them, so why wouldn't I won't to use them?
But a credit card is actually something that can be used to your advantage and you only really get in to debt if you do not pay the bill off completely at the end of the month.
Yes, you could say that it is a loan but if you take that view then the energy companies are, for example, making you a loan as are the phone company and anyone else you pay in arrears for their services.
Personally, I put all my month spending on my credit card. I get 1% cash back on all my spending and extra legal protection on any purchase I made over £100. I keep my money in a savings account earning interest and only put the money into my non-interest current account on the day I pay the bill off.
I do not use a debit card because I would not get cash back and would not have any legal protection but more so, because I would always need to be sure that there was enough money rotting away in my current account to cover my spends.
So unless you feel you cannot trust yourself with a credit card, in which case do not even consider applying for one, they are a convenient and beneficial way of managing money.
If you pay someone by cheque, it will not be paid into a bank immediately. That may have to wait until the next time the payee is near a bank. And even once the cheque is paid in, it may take several days until it gets cleared. Only then will money be debited from your account. So, essentially, all this time you have been enjoying an unofficial loan.
Of course, there is one difference between the 'loan' you get when paying by cheque and when paying by credit card. You can pay by credit card even when you don't have sufficient money in your bank account to cover the payment. [Whether you later go on to pay off the full amount by the due date is up to you.]
When paying by cheque, I believe it is a criminal offence if you don't at the time have enough money in your account - even if you know you will have enough by the time the cheque is cleared.
I used to have a credit card that paid (a good) rate of interest on positive balances - the card was taken over by Abbey and all the good things about it disappeared. (The card had my photo and signature embedded in a lower layer of the plastic)
However, do you actually have a credit transaction if you have a positive balance in your account? For instance, if you load the account with £150 up front do you have the legal buying protection if you then buy a £150 item with the card?
It cost me zero to use a debit card. It cost me zero to use a credit card (I pay the bill in full each month). I get cash back when using a credit card.
If you, as a customer, are being charged to use a debit card you have the wrong bank account.
That's why the likes of Tesco need to compete more at local level! Customers don't owe a shop keeper a living - the shop needs to provide a service that the customer wants. If one of these services is payment by card that's what they need to provide.
If a company doesn't want to accept credit cards than just put up a notice saying so. The customer than has the choice of not using the shop. There are still a few organisations around that appear to be successful but don't accept credit cards (Aldi/Lidl have this business model).
They do or did. I think in the very early days they didn't. I've not investigated the current situation, but at one time one was sometimes advised to preload a credit card account when going on holiday.
I presume there would be no financial protection for any credit balances.
I am sure the owners of businesses are aware of the difference. For consumers, there may be self interest reasons. I think the 1-2% only applies to low risk businesses. I suspect that many consumers don't realise it costs money to bank cheques, or cash, as well.
They are in a market. The credit card companies only exist because retailers are prepared to pay that level of commission for someone else to take on the potential debt risk, and, at least historically, to avoid
the costs of handling cash.
To really minimise payment costs, they should be encouraging the use of BACS/Faster Payments payments.
I'm pretty sure that you can pay the CC company any amount you want to. Most people pay exactly what is owed at the statement state (and pay no interest), or pay less and do get charged interest. But I'm pretty sure that there is no reason why you can't overpay. I doubt if they will send the excess back to you. All that will happen is that you'll have less to pay next month.
The difference is because the CC provides a loan of typically up to 50 days, and someone has to pay for this. And of course, sometimes the seller passes this on to the payer, who must pay a surcharge for using CC. With the DC, there is no loan, hence only a small nominal charge on the seller for using the bank's services (a lot cheaper than for cheques, I believe). [Don't ask me why some sellers ask for similar surcharges for CC and DC.]
It's up to them to price their wares so that they can recover their overheads - which will range from the cost or providing toilet paper for their employees to what the banks charge them for using their banking services. Of course, where appropriate, only the CC provides additional guarantees for the product being bought, and maybe they are reluctant to be landed with this obligation.
If they accept plastic, I rarely find that businesses won't accept both CC and DC (although I expect that they prefer the latter). Surprisingly, people like builders, garden maintenance firms and the like often still only take cheques. I guess that the best non-CC way of paying them would be to get their bank details, and pay them online using BACS. [Presumably this can be done without involving either party in any security risks because, if you give someone a cheque, your bank account number and sort code are printed on the cheque.]
Because they're not deposit-holding institutions, and if you had a positive balance on a credit card and the card company happened to go bust then you would lose it all - there would be no backup guarantee by either the regulator or the government. They are, therefore, prohibited by the terms of their licence from being borrowers as well as lenders. So, while some credit card operators are more willing to ignore small positive balances than others, they are all technically obliged to forbid them.
The reason that they're different it because, although they appear similar to users, behind the scenes they operate completely differently. A debit card is simply an interface into an existing bank account, which is paid for in other ways. A credit card is an interface into a standalone credit account, which is paid for solely by use of the card and interest charged on the debt. But yes, the companies could do a better job of explaining that to their customers.
Egg Money had used to do this and, at one time, even paid interest on credit balances. But they stopped doing this, and now don't exist at all.
The T&Cs for my Halifax CC explicitly forbid credit balances, and say that if you create one they will immediately refund it. Pity - because it would be useful to pre-load it for overseas cash withdrawals so as to avoid paying any interest.
When trying to pay my Barclaycard online, their computer threw a bit of a wobbly just as the transaction was being confirmed. It ended up taking my the payment twice.
I didn't seem to get anywhere useful when I talked to someone on their helpline, so I enlisted help at my local branch of Barclays. The resident financial advisor eventually got through to someone who actually understood what had happened. However, I'm pretty sure that, initially, they still couldn't see why I didn't just leave things as they were, with me having paid something like £1200 twice instead of once - with the second £1200 simply being an advance payment on next month's bill.
I got a Halifax CC last year, and (of course) I haven't really read the Ts&Cs. Your info is duly noted. BTW, these days, both CCs get paid automatically online by DD.
It costs most shops more to handle cash than it does to handle credit cards.
Cash and cards have opposite economies of scale. For small traders, cash is nearly free to handle, particularly if you disregard the time taken to bank it - all it costs is a transaction fee for depositing it. Credit cards, on the other hand, can cost small traders anything up to 5% per transaction.
For large traders those are reversed. The more cash you take, the more expensive it becomes to handle - not only the time taken to manage it, but security costs and losses due to staff fraud increase exponentially. But the more card payments you take, the lower the transaction fee becomes.
That's one of the reasons why supermarkets are so keen to offer cashback on debit card purchases. It's effectively a way of getting their customers to do their cash handling for them - every cashback transaction reduces the amount of physical cash which has to be counted, secured and transported.
Yes, so do I. But ideally, if you use the Halifax card for getting cash overseas, it's as well to pay it off ASAP without waiting for the DD to kick in.
BeanSmart website is not affiliated with any of the manufacturers or service providers discussed here.
All logos and trade names are the property of their respective owners.