Consumer Rights: We think plastic is fantastic, even if we don’t understand it
Around a fifth of Britain’s debit and credit-card holders don’t know the difference between them
Saturday 13 July 2013
End-of-term reports were two a penny this week. One from a big discount website showed that many of us have no idea what terms like PPI, ATMs and APR mean, but most striking is that a fifth of us don’t know the difference between a credit card and a debit card.
Another from The UK Cards Association shows that even if we don’t know our credits from our debits we love our plastic. There are 47 million debit-card holders and 30 million credit-card holders with 169 million cards between us. We use cards for nearly three quarters of all spending on the high street and the majority of purchases on the internet. The value of card payments is forecast to nearly double in the next decade to £840bn as debit cards increase in popularity with young people who have grown up with them. Contactless payment cards will encourage us to use them for low-value payments.
Perhaps we do have a tendency to lump all plastic cards together, but it’s worth knowing the difference. If you pay for something using a debit card you’re paying for the goods with your own money. The amount is usually taken off your account balance immediately. If you use a credit card to pay for the same goods you’re using borrowed money. There may be a charge on top and there will be interest to pay on the loan if you don’t repay it in full by a particular date.
Credit cards have the advantage of allowing you to pay now for goods even though you don’t have the money in your account. If you know you will have the money to pay the full amount by the due date, and remember to do it, a credit card can be useful, but if you miss the due date you’ll end up paying more than on the price ticket. There is one important protection a credit card gives you however. If you’re buying something costing more than £100 and less than £30,000, under section 75 of the Consumer Credit Act the credit-card company is considered “jointly and severally liable to the debtor” if something goes wrong.
For example, if you buy a flight from an airline and it goes bust before you travel, it is unlikely to be able to repay you, but you should be able to claim the money back from your credit-card provider. If you buy something that doesn’t arrive the same applies and you’re protected even of you only pay for part of the item, such as the deposit on your credit card. As long as the item itself is worth more than £100, you can claim the whole cost of it back if it’s faulty, does not turn up for some reason, or the company goes bust before delivery. Some cards may offer additional insurance for you purchases, or benefits such as legal or medical services while you are abroad, but these are in addition to this section 75 protection.
Even if you can afford to pay for something without your credit card, it is still worth using it as a safeguard.
The advantage of using a debit card is that you can keep tabs on what comes out of your account and what’s left, just as you would if you took the money out using a cash machine. It’s easier to control your spending and harder to go overdrawn.
Whatever cards you choose check whether there are any perks like cashback, points, discounts or offers that you could benefit from.
Also check the APR on credit cards. Anyone borrowing money through a loan, card, credit agreement, etc, should check out the APR (annual percentage rate). It’s the figure that allows you to compare deals. If you want to borrow £300 and pay it back over 12 months you will pay a lot less interest, administration and other arrangement and management fees, if you sign up for a deal at 10 per cent APR than if it is at 100 per cent APR. Ultimately, you need to know how much you will repay in each instalment, and how many of those instalments you will have to pay, to know whether you can afford a loan, but the APR is a good guide to which deal is the cheapest. The APR on credit cards varies and will tell you which is cheapest if you do end up having to pay charges.
If financial education in schools bears fruit, future generations will know all about APRs and plastic cards. In the meantime, we should all do a bit of revision because you can’t rely on financial organisations to make the explanation simple.
Q. I’m a self-employed IT consultant and the only earner in our family as we have a young child. I’m thinking about taking out insurance in case I can’t work. Is critical-illness cover the best option? DP, London
A. Critical-illness cover pays out a lump sum if you are diagnosed with one of a number of conditions set out in your policy. The money is to cover treatments you’ll need and adaptations to your home rather than give you an income. Policies tend to cover things like cancer, heart attack, benign brain tumour, coronary artery bypass, heart-valve replacement, multiple sclerosis and stroke. If it’s not on the list of conditions covered by your policy you won’t be covered. However, there is a trend towards severity-based critical-illness cover which pay out more depending on the seriousness of the condition. If you decide to opt for critical-illness cover read the policy carefully so you understand what’s covered and what’s not. It might be better to choose an income-replacement policy. This will give you an income while you’re ill. Some feel private health insurance to cover medical treatment is the best option. The problem with insurance is that you are trying to predict what might go wrong so you have the right cover in place to counteract it. Consequently, it’s a gamble.
Budget 2015: George Osborne is set to get tough with further cuts in public spending
Bargain Hunter: Our exclusive deal cuts the cost of buying foreign currency by 20 per cent
Five Questions On: GB Energy's new tariff
Simon Read: 'Taylor Swift tickets purchased on Viagogo were cancelled hours before the concert'
Bank-beating exchange rates on your international payments
- 1 Nathan Collier: Montana man inspired by same-sex marriage ruling requests right to wed two wives
- 2 People all over the world are getting semicolon tattoos to draw attention to mental health
- 3 Van driver who comforted Clark Carlisle and called 999 after suicide attempt dies age 24
- 4 James Blunt was special guest on the highest-rating Top Gear episode ever
- 5 The biggest first date turnoff has been revealed
Nathan Collier: Montana man inspired by same-sex marriage ruling requests right to wed two wives
Greece crisis: IMF was pushed around by Angela Merkel and Nicholas Sarkozy – and now it is being humiliated
'I wish the BBC would stop calling it Islamic State' – David Cameron unleashes frustration at broadcaster
Forget little green men – aliens will look like humans, says Cambridge University evolution expert
Girl, 7, stares down hate preacher at Ohio festival with pro-LGBT rainbow flag gesture
Sickness and disability benefits could be reduced by £30 a week as part of £12bn welfare cuts
iJobs Money & Business
£15000 - £17000 per annum: Recruitment Genius: This company offers a range of ...
£15000 - £16000 per annum: Recruitment Genius: Customer Service Advisors are r...
£20000 - £25000 per annum + OTE £45K: SThree: SThree were established in 1986....
£40000 - £60000 per annum: Recruitment Genius: A Compliance Manager is require...
Day In a Page
Previously two semi-detached properties, this five-bedroom home is spread over three floors with a large breakfast kitchen, orangery, office and gym on the second floor.
This five-bedroom home enjoys countryside views over the Blyth estuary to Southwold, offering flexible living space with a ground-floor annexe - ideal for use as a holiday let.
Close to the market town of Eye, this four-bedroom detached home offers a double-height living room which takes the place of the original, 19th-century, chapel nave.
Dating back to the 19th century, this four-bedroom home needs modernising. Spanning three storeys, the red-brick house has a fireplace, a small terrace and a cellar.
Just outside of Cambridge, this single-storey home offers three double bedrooms, a living room with vaulted timber ceiling and ladder steps that lead to a mezzanine study area.
This six-bedroom Georgian home is on three floors with open fireplaces, a two oven Aga, an annexe, and cottage gardens with outbuildings and a car barn.
A former coach house, Glebe Farm Stable is now a three-bedroom cottage with a double car barn, an attached office, kennels and an outbuilding that's currently used as a gym.
Located beside an impressive Victorian viaduct, this four-bedroom home has an open-plan living area that is glazed on two sides, with skylights and high ceilings.
A former furniture workshop, this three-bedroom home has high ceilings and painted brick walls, in a village setting only fifteen miles from the coast.
This five-bedroom stone townhouse features a pine staircase and an Inglenuk fireplace, double doors from the lounge give access to an enclosed courtyard.
This five-bedroom, detached home blends traditional and modern design; the sleek kitchen features a gas hob and oven set within an exposed chimney breast.
Moored in Chelsea's Cheyne Walk, this houseboat offers two double bedrooms and a teak deck that's ideal for al-fresco dining.
Surrounded by woodland, this five-bedroom manor house has plenty of outdoor storage space in the form of three converted loose boxes, two smaller outhouses and a woodstore.
This six-bedroom home is set amongst three acres of grounds. Currently a large family home, Clift Hill has potential to make a B&B or countryside retreat, subject to change of use permissions.
This Grade II-listed three-bedroom home is situated on a private road, just a short walk from the sandy beaches of Frinton-on-Sea.
Less than five miles from Malmesbury, this four-bedroom cottage comes with equestrian facilities and gardens that extend to approximately three acres.
Spanning three storeys, this late-Victorian five-bedroom farmhouse is a spacious family home with a modern interior and B&B potential.
With an original church arch, this triplex one-bedroom church conversion has a light, spacious, feel and comes with a secure off-street parking space.
This recently-refurbished three-bedroom home has bi-folding doors that lead out to a decked seating area - ideal for alfresco dining this summer.
Well-located for coastal walks and popular restaurants, this detached four-bedroom home offers views over farmland, to the Solent, the Purbecks and Bournemouth.
If you love high ceilings, school conversions like this one are bang on the money. This two-bedroom flat is minutes from Burgess Park and the foodie haven at Borough Market.
Set within a church conversion in Bermondsey, this two-bedroom maisonette combines existing features, such as original arches and brickwork, with a contemporary finish.
In the pretty market town of Bungay, this grade II-listed Mill House is arranged over four floors, offering four bedrooms and three reception areas.
This four-bedroom Edwardian home offers a combination of original features and contemporary design after a renovation by the current owners.
This four-bedroom home offers a vaulted ceiling in a breakfast room that's ideal for summer entertaining with doors that open to the patio and garden.
On the market for the first time in more than 50 years, this six-bedroom home is a project with vast potential - spread over three floors of living space.
This five-bedroom home comes with a range of outbuildings including a large barn which could be converted into a self-contained granny-flat or rental.
Surrounded by rolling countryside, this four-bedroom barn conversion comes with a self-contained, one-bedroom annexe that could serve as an office or a holiday let.
Located near Harrogate town centre, this five-bedroom Victorian terrace is arranged over three storeys while a current study serves as an optional sixth bedroom.
A ground-floor flat in a country house, located a mile from Sway; this two-bedroom home would make an ideal weekend retreat on the edge of the New Forest.
On a popular residential lane in Caterham on the Hill, this four-bedroom family home offers a secluded garden and a convenient location for local schools and public transport.
Just a short walk from Westerham green, this three-bedroom cottage has a light kitchen with exposed brickwork and double doors that lead to a south-facing garden.
In a prime spot opposite the River Thames, this one-bedroom flat has an 18sq ft reception room with glass doors that open out to a private terrace.
Set in the hills above Llanwrda Village, west Wales, this 18th-century three-bedroom farmhouse has holiday-let potential from a separate barn conversion and annexe.
This charming end-of-terrace townhouse is arranged over three floors, with two double bedrooms and a private courtyard garden located at the rear of the property.
Located in the University area, this semi-detached five-bedroom home is arranged over three floors - there's even a rear garden and off-road parking too.
Only a few minutes' drive from the charming town of Marlow, this two-bedroom home sits on the private riverside estate of Harleyford.
This detached four-bedroom home in Middleyard is arranged over two floors, with features that include a wood-burning stove and bespoke oak staircase.
In a row of eight detached Georgian residences, this five-bedroom home offers views of The Sound, Mount Edgcumbe and Cornwall from its impressive veranda and full-length balcony.
If you love cooking for friends this two-bedroom flat - complete with views of the iconic Battersea Power Station and an open-plan kitchen/dining area - will go down a treat.
Located above Grasmere village, this five-bedroom home is arranged over three floors and offers countryside views across Grasmere Lake towards Silver Howe.
This four-bedroom detached home comes with a double carport, useful workshop, garden and two walkways that offer views of the adjacent countryside.
With space for an equestrian business, a greenhouse for growing your own veg, a wine store and a gym; this five-bedroom home has all the ingredients for a country retreat.
The decked roof terrace of this two-bedroom flat is perfect for summer drinks while large windows and ample storage space make for a light and spacious interior.
Set sail for this four-bedroom farmhouse in Cowes. With five acres of land and an indoor pool, this home oozes character. There is even potential to let a one-bedroom annexe.
Surrounded by approximately 15 acres of grounds, this six-bedroom grade II-listed home has been extensively refurbished yet retains many period features.
This four-bedroom home comes with a two-bedroom cottage and commercial office, with planning to extend, in a stunning courtyard setting.
In a pretty Norfolk village, this four-bedroom family home is surrounded by landscaped gardens, with even a self-contained annex for guests.
A few miles from the seaside at Perranporth, this four-bedroom farmhouse sits amongst nine acres of idyllic grounds - including a lake and two barns used as holiday lets.
This five-bedroom home is arranged over three floors of a converted Victorian hospital, offering spectacular views of the Pentland Hills - only three miles from the city centre.