The personal finance expert that credit cards aren’t actually the ‘villains’ when it comes to money.
Martin Lewis has announced a warning to debit card users on his podcast.(Image: Kate Green/Getty Images)
Money expert Martin Lewis has put out an urgent warning to anyone who uses a debit card from well known banks such as Nationwide, Lloyds, Natwest and Barclays.
The personal finance expert has revealed on his BBC podcast that many people choose to use a debit card over a credit card in the UK, with many following the belief that debit cards are better.
However, he has revealed that this isn’t always the case, with Brits easily landing themselves further into debt if they enter into their overdraft on a debit card due to soaring interest rates, reports the Mirror.
He said: “Many people tend to think credit card’s bad, debit card’s good, but it just isn’t that simple. First of all, if you’re overdrawn, a debit card is a debt card too, and a typical high street overdraft is at 40 per cent annual interest compared to a high street credit card at 25 per cent annual interest.
“Overdrafts are more expensive debt than credit cards. If you had to owe on one, you’d be best not to owe on either. If you had to owe on one, you would be better to owe on the credit card.”
The money expert reveals that when it comes to overdrafts, debit cards are worse than credit cards.(Image: Getty Images)
He also pointed out that credit card purchases come with an enhanced protection. Under the UK’s Consumer Credit Act 1974, Section 74 is a consumer protection right that makes a credit card provider jointly liable with a supplier if something goes wrong with a purchase.
This applied to individual items priced between £100 and £30,000, and it safeguards consumers if the products are faulty, don’t match their description, or fail to arrive, even when only a deposit has been paid by credit card.
Martin explained: “On the credit card, plus you have extra protection when spending on a credit card too.
“Section 75 rules state, if you’re buying something that costs over £100 up to £30,000 and you pay for any of it, even a penny of it on a credit card, the credit card company is liable for the entire amount and jointly liable with the retailer. So if something goes wrong, you can go back to it.
“On debit cards, you only get charged back. Add to that the fact that on a credit card, you can also get rewards on your spending, cash back of up to five per cent for a few months and up to one per cent on a regular basis.
“Then for many people, done sensibly as long as you’re paying your credit card off in full every month and you’ve chosen the right credit card, it’s often a better way to spend than a debit card.”
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Many people backed this matter, with one person commenting: “With regard to chargeback and sec 75 protection – that needs looking into.
“There is no consistency between the banks and even within banks on how they interpret the same MasterCard/visa rules. Customers of Ripple Energy (in administration) are finding getting a refund is a lottery”.
While another person also wrote: “Plus you can do a subsequent balance transfer to a different credit card company and make use of zero interest opportunities; some have quite long periods with their introductory product.
“This is useful for large, one off purchases or a temporary cash flow problem e.g. Christmas.”
A third person stated: “Another advantage of some credit cards (e.g. Nationwide) is zero per cent commission on purchases in Europe.”
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