There seems to be A bit of a 'thing' with young people (by which I mean those younger than me, so those in their 20s/30s) paying everything on cards.
Can I remind everyone that it is very possible to fall into a hole with credit cards/debts.
Well TBH you can do that with cash too. If you spend cash that is needed for rent/mortgage/gas bill then you will still get into trouble.
Advantages of credit cards:
* slight 'carry' on the up to 50 days interest-free you get (date of purchase to credit card bill being due the following month) - rather negligible at this point due to criminally low interest rates
* much less likely to suffer financial loss compared with cash as consequence of theft/losing wallet
* build credit rating if you use them, which improves your chances of getting a mortgage etc.
* if you pay off your balance each month they will give you a bigger limit, which is useful if you need to make more/bigger purchases
* cheap form of lending - under 8% interest on best cards and there's no further credit check beyond the initial application - much cheaper than overdraft and the limit tends to be much higher, and far cheaper than payday loans
* you don't need to pay off the debt immediately, minimum payment is typically 1%, so you can pay off the whole debt, or almost nothing - so it's far more flexible than a personal loan where there is a fixed monthly payment
* they give you free stuff, e.g., free flights, cashback (I get 1.25% on every penny I spend)
* protection against bankrupt retailers - just reclaim from credit card company
* protection against scammers and fraud - as above
* you can setup a standing order to pay them off in full each month
* you have a full record of all your transactions (typically available online + paper), which you won't get with cash.
The disadvantages:
* some places don't accept them
* their flexibility means that you can behave like a 3 year old child and spend money that you don't have and can't possibly pay back.
There is no reason to be frightened of credit cards, they are absolutely fantastic.
When I was living overseas I got into some debt, when I returned I put the money onto zero/low-interest credit cards and paid it off on my own schedule. This was much cheaper and more flexible than taking out a loan.
With the exception of a house IMO borrowing money to buy things is a bad idea, but spending £2k in December on a £1500 income isn't really a problem PROVIDING you are willing and understanding that you will only have £1300 to spend in January, February, etc. until it is paid off, and a credit card is a really good way to do that.
If your credit card balance NEVER reaches zero then that's a problem, but the responsible use of credit cards to balance your spending requirements is MUCH better than most of the alternatives.
Of course you can tell people that they should always save first, spend later, but that's not always the best approach. Example: you are going on holiday next July, the flights are on sale now for £400 per person, the usual price is £700, if you buy NOW on your credit card you are going to pay £1600, whereas if you save up till next July you will pay £2800. If you pay the debt off between now and July the interest might be around £100, still far cheaper than paying the usual flights. Provided you remember that you are going to have to spend less tomorrow in return for your spending today, it's not a problem.
hock: Fiver for a poppy!?
