Counter-intuitively, the less money I have, the more I dislike credit. My model of living – low income but low expenditure – works because I don’t have debts. And that includes credit card debt. This is partly because I am not organised or sophisticated enough to run my credit cards efficiently, so it works in my favour. I do know people who are clever enough to move from one 0% credit card deal to the next, just paying off the minimum each month. Pretty neat, although not exactly a free lunch because there are transfer fees.
But then I also know a few people with massive credit card debts. One friend is still paying off a chunky five-figure sum accrued more than a decade ago for expensive medical treatment in the US. Others have credit card debts hanging over them from impetuous holidays taken a few years back. Yes, the trips were amazing. But, three years on, the suntan has long faded yet the debt remains. Pay off just the minimum each month and it'll take forever to get rid of the debt. It’s hardly in the Christmas spirit but take a look at the calculator below: it might make you think twice about splurging on the card if you can’t repay more than the bare minimum each month.
Of course I spend too much money at Christmas. And I do it on my credit card (so I get consumer protection and, for my John Lewis card, gift vouchers). But I pay off the balance in full each month. If I haven’t got enough in my bank account – and being a freelance I suffer from cash-flow problems when companies are slow in paying me – then I use my savings and replace the money when I get paid. After all, it makes sense to pay off borrowing when I only earn 0.75% on my savings and the rate on my credit card is 16.9%.
Spending on credit? Check out how much your spree will cost at: www.moneysavingexpert.com/credit-cards/minimum-repayments-credit-card.