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.

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at

Life and Style
love + sex A new study has revealed the average size - but does that leave men outside the 'normal' range being thought of as 'abnormal'?
Arts and Entertainment
The Palace of Westminster is falling down, according to John Bercow
voices..says Matthew Norman
Steve Bruce and Gus Poyet clash
Arts and Entertainment
Jake and Dinos Chapman were motivated by revenge to make 'Bring me the Head of Franco Toselli! '
arts + ents Shapero Modern Gallery to show explicit Chapman Brothers film
Arts and Entertainment
Kurt Cobain performing for 'MTV Unplugged' in New York, shortly before his death
music Brett Morgen's 'Cobain: Montage of Heck' debunks many of the myths surrounding the enigmatic singer
Life and Style
Brendan Rodgers
football The Liverpool manager will be the first option after Pep Guardiola
Arts and Entertainment
Myanna Buring, Julian Rhind-Tutt and Russell Tovey in 'Banished'
TV Jimmy McGovern tackles 18th-century crime and punishment
Arts and Entertainment
Paul Whitehouse as Herbert
arts + ents
Christian Benteke of Aston Villa celebrates scoring the winner for Aston Villa
Bill O'Reilly attends The Hollywood Reporter 35 Most Powerful People In Media Celebration at The Four Seasons Restaurant on April 16, 2014 in New York City
media It is the second time he and the channel have clarified statements
Finacial products from our partners
Property search
Latest stories from i100
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

    Recruitment Genius: Sales Executive - OTE £40,000

    £15000 - £18000 per annum: Recruitment Genius: This is a great opportunity for...

    Austen Lloyd: Law Costs HOD - Southampton

    £50000 - £60000 per annum + Excellent Salary: Austen Lloyd: An outstanding new...

    SThree: Recruitment Resourcer

    £20000 - £21000 per annum + uncapped commission: SThree: As a graduate you are...

    Ashdown Group: Junior Application Support Analyst - Fluent German Speaker

    £25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

    Day In a Page

    Syrian conflict is the world's first 'climate change war', say scientists, but it won't be the last one

    Climate change key in Syrian conflict

    And it will trigger more war in future
    How I outwitted the Gestapo

    How I outwitted the Gestapo

    My life as a Jew in wartime Berlin
    The nation's favourite animal revealed

    The nation's favourite animal revealed

    Women like cuddly creatures whilst men like creepy-crawlies
    Is this the way to get young people to vote?

    Getting young people to vote

    From #VOTESELFISH to Bite the Ballot
    Poldark star Heida Reed: 'I don't think a single bodice gets ripped'

    Poldark star Heida Reed

    'I don't think a single bodice gets ripped'
    The difference between America and Israel? There isn’t one

    The difference between America and Israel? There isn’t one

    Netanyahu knows he can get away with anything in America, says Robert Fisk
    Families clubbing together to build their own affordable accommodation

    Do It Yourself approach to securing a new house

    Community land trusts marking a new trend for taking the initiative away from developers
    Head of WWF UK: We didn’t send Cameron to the Arctic to see green ideas freeze

    David Nussbaum: We didn’t send Cameron to the Arctic to see green ideas freeze

    The head of WWF UK remains sanguine despite the Government’s failure to live up to its pledges on the environment
    Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

    Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

    Set in a mythologised 5th-century Britain, ‘The Buried Giant’ is a strange beast
    With money, corruption and drugs, this monk fears Buddhism in Thailand is a ‘poisoned fruit’

    Money, corruption and drugs

    The monk who fears Buddhism in Thailand is a ‘poisoned fruit’
    America's first slavery museum established at Django Unchained plantation - 150 years after slavery outlawed

    150 years after it was outlawed...

    ... America's first slavery museum is established in Louisiana
    Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

    Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

    The first 'American Idol' winner on how she manages to remain her own woman – Jane Austen fascination and all
    Tony Oursler on exploring our uneasy relationship with technology with his new show

    You won't believe your eyes

    Tony Oursler's new show explores our uneasy relationship with technology. He's one of a growing number of artists with that preoccupation
    Ian Herbert: Peter Moores must go. He should never have been brought back to fail again

    Moores must go. He should never have been brought back to fail again

    The England coach leaves players to find solutions - which makes you wonder where he adds value, says Ian Herbert
    War with Isis: Fears that the looming battle for Mosul will unleash 'a million refugees'

    The battle for Mosul will unleash 'a million refugees'

    Aid agencies prepare for vast exodus following planned Iraqi offensive against the Isis-held city, reports Patrick Cockburn