We Should Spend More On Our Credit Cards by Finance News Bulletin

Published: 10/09/07

That is at least what we are led to believe My view is a small different - I don't think we use our credit cards enough Let me clarify that horrendously reckless statement with the aid of some particulars and figures from the latest APACS spending figures releaseHere in the UK, 31

4m people have credit cards Of those that have credit cards, we have an average 24 cards each The average money owing outstanding on each card is £718, or just over £1,700 for each cardholder

To put that in perspective, £1,700 is equivalent to what we currently use on our cards in just over five months Or, put another way, on average we take just over five months to disburse off our credit card amount overdueHmmm, that's not too good, especially considering it's reckoned that half of us disburse off our credit card balances in full each month This means the rest of us are taking almost a year to pay off their debts

This is where the news gets a small brighter The total amount we owe on our credit cards has been falling steadily for two existence nowSince 2005 our total credit card money owing has fallen from £575b to £53

5b, a drop of some 7% Our spending on credit cards has remained roughly the same, but we've been paying back more Now whether this is down to good financial habits, or has been forced upon us by banks cutting back on credit limits is hard to speak But it's good news nonetheless

Looking back a little further, we can see that payable £385b on our credit cards at the end of 2000 Why is this date significant Well, this is when Egg introduced the first 0% balance move card

So credit card balances have only full-grown by about 5% a year since that tip Given that you'd expect credit card spending to at least grow in line with inflation, it looks similar to we'd haven't been as out of manage with our credit cards as you might believePersonally I find it hard to believe we'd had 0% equilibrium transfers for less than seven existence Incidentally, this year is the tenth anniversary of the first cash back credit card coalition & Leicester) and the eleventh of the first loyalty credit card (Goldfish)

Unlike credit card spending, debit certificate purchases have been growing like topsy We exhausted £79b on debit cards in 2000 This year, we're on track to use £220b This means we use over 80% more on debit cards than we do on our credit cards

money withdrawals has been growing quite quickly too In 2000 we withdrew £113b This year, no hesitation partly due to there being 3 money machines for each person, we'll draw out £180b So our cash spending exceeds our credit card spending by 50%

Three reasons coil to mind Firstly, debit card and cash expenditure doesn't let you take pleasure in the interest-free period you get with credit card purchases (typically around 56 days) Secondly, you won't be able to earn free cash by by a cashback card Last of all, for purchases between £100 and £30,000, we don't get the defense of part 75 of the Consumer Credit Act, which means the credit card company is jointly liable should there be a difficulty with what we've bought

So next time you pay with something by cash or withdrawal card, stop and think if you'd be improved off using your credit card instead, provided of course you disburse off the additional debt before it costs you any interest© Copyright 1998-2007, The assorted Fool Limited All rights reserved This material is for personal employ only

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