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

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.

Alexis Sanchez has completed a £35m move to Arsenal, the club have confirmed
sportGunners complete £35m signing of Barcelona forward
Poor teachers should be fearful of not getting pay rises or losing their job if they fail to perform, Steve Fairclough, headteacher of Abbotsholme School, suggested
voicesChris Sloggett explains why it has become an impossible career path
world cup 2014
Ray Whelan was arrested earlier this week
Arts and Entertainment
In a minor key: Keira Knightley in the lightweight 'Begin Again'
Arts and Entertainment
Celebrated children’s author Allan Ahlberg, best known for Each Peach Pear Plum
peopleIndian actress known as the 'Grand Old Lady of Bollywood' was 102
Wayne’s estate faces a claim for alleged copyright breaches
newsJohn Wayne's heirs duke it out with university over use of the late film star's nickname
Life and Style
It beggars belief: the homeless and hungry are weary, tortured, ghosts of people – with bodies contorted by imperceptible pain
lifeRough sleepers exist in every city. Hear the stories of those whose luck has run out
Mick Jagger performing at Glastonbury
Life and Style
fashionJ Crew introduces triple zero size to meet the Asia market demand
Santi Cazorla, Mikel Arteta and Mathieu Flamini of Arsenal launch the new Puma Arsenal kits at the Puma Store on Carnaby Street
sportMassive deal worth £150m over the next five years
Arts and Entertainment
Welsh opera singer Katherine Jenkins
musicHolyrood MPs 'staggered' at lack of Scottish artists performing
Life and Style
beautyBelgian fan lands L'Oreal campaign after being spotted at World Cup
Arts and Entertainment
Currently there is nothing to prevent all-male or all-female couples from competing against mixed sex partners at any of the country’s ballroom dancing events
Potential ban on same-sex partners in ballroom dancing competitions amounts to 'illegal discrimination'
Finacial products from our partners
Property search
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Business Analyst Consultant (Financial Services)

    £60000 - £75000 per annum: Harrington Starr: Business Analyst Consultant (Fina...

    Systems Administrator - Linux / Unix / Windows / TCP/IP / SAN

    £60000 per annum: Harrington Starr: A leading provider in investment managemen...

    AVS, JVS Openlink Endur Developer

    £600 - £700 per day: Harrington Starr: AVS, JVS Openlink Endur Developer JVS, ...

    Technical Support Analyst (C++, Windows, Linux, Perl, Graduate)

    £30000 per annum: Harrington Starr: A global leader in trading platforms and e...

    Day In a Page

    A History of the First World War in 100 Moments: Peace without magnanimity - the summit in a railway siding that ended the fighting

    A History of the First World War in 100 Moments

    Peace without magnanimity - the summit in a railway siding that ended the fighting
    Scottish independence: How the Commonwealth Games could swing the vote

    Scottish independence: How the Commonwealth Games could swing the vote

    In the final part of our series, Chris Green arrives in Glasgow - a host city struggling to keep the politics out of its celebration of sport
    Out in the cold: A writer spends a night on the streets and hears the stories of the homeless

    A writer spends a night on the streets

    Rough sleepers - the homeless, the destitute and the drunk - exist in every city. Will Nicoll meets those whose luck has run out
    Striking new stations, high-speed links and (whisper it) better services - the UK's railways are entering a new golden age

    UK's railways are entering a new golden age

    New stations are opening across the country and our railways appear to be entering an era not seen in Britain since the early 1950s
    Conchita Wurst becomes a 'bride' on the Paris catwalk - and proves there is life after Eurovision

    Conchita becomes a 'bride' on Paris catwalk

    Alexander Fury salutes the Eurovision Song Contest winner's latest triumph
    Pétanque World Championship in Marseilles hit by

    Pétanque 'world cup' hit by death threats

    This year's most acrimonious sporting event took place in France, not Brazil. How did pétanque get so passionate?
    Whelks are healthy, versatile and sustainable - so why did we stop eating them in the UK?

    Why did we stop eating whelks?

    Whelks were the Victorian equivalent of the donor kebab and our stocks are abundant. So why do we now export them all to the Far East?
    10 best women's sunglasses

    In the shade: 10 best women's sunglasses

    From luxury bespoke eyewear to fun festival sunnies, we round up the shades to be seen in this summer
    Germany vs Argentina World Cup 2014: Lionel Messi? Javier Mascherano is key for Argentina...

    World Cup final: Messi? Mascherano is key for Argentina...

    No 10 is always centre of attention but Barça team-mate is just as crucial to finalists’ hopes
    Siobhan-Marie O’Connor: Swimmer knows she needs Glasgow joy on road to Rio

    Siobhan-Marie O’Connor: Swimmer needs Glasgow joy on road to Rio

    18-year-old says this month’s Commonwealth Games are a key staging post in her career before time slips away
    The true Gaza back-story that the Israelis aren’t telling this week

    The true Gaza back-story that the Israelis aren’t telling this week

    A future Palestine state will have no borders and be an enclave within Israel, surrounded on all sides by Israeli-held territory, says Robert Fisk
    A History of the First World War in 100 Moments: The German people demand an end to the fighting

    A History of the First World War in 100 Moments

    The German people demand an end to the fighting
    New play by Oscar Wilde's grandson reveals what the Irish wit said at his trials

    New play reveals what Oscar Wilde said at trials

    For a century, what Wilde actually said at his trials was a mystery. But the recent discovery of shorthand notes changed that. Now his grandson Merlin Holland has turned them into a play
    Can scientists save the world's sea life from

    Can scientists save our sea life?

    By the end of the century, the only living things left in our oceans could be plankton and jellyfish. Alex Renton meets the scientists who are trying to turn the tide
    Richard III, Trafalgar Studios, review: Martin Freeman gives highly intelligent performance

    Richard III review

    Martin Freeman’s psychotic monarch is big on mockery but wanting in malice