Younger spenders most wise to the benefits
Controlling spending temptations and unintentionally falling into debt are the main consumer concerns when it comes to owning a credit card, according to research from Equifax, the consumer and business insights expert. The online survey of over 2,000 people does however reveal positive awareness about the potential benefits of spending on credit cards, including credit score improvement and purchase protection.
Getting into debt (40%) and spending more than you can afford, either by being tempted (34%) or unintentionally (23%), are three of the main concerns of respondents about using a credit card – higher than issues around fees or scams.
Covering emergency expenses (42%), having purchase protection (40%) and spreading the costs of large purchases (27%) were seen as the main benefits.
The survey, conducted online with YouGov, also revealed a greater understanding of the relationship between credit cards and credit scores among younger people. Nearly four in ten of 18-24 year olds (38%) and 44% of 25-34 year olds believe a credit card can help build their credit score, compared to just 21% of 45-54 year olds and 15% of over 55s. There is also greater mindfulness among the younger age groups that missing payments can harm their credit score.
Robert McKechnie, head of products at Equifax, said: “When it comes to credit, it’s clear many people lack confidence in being able to manage their own spending. But, if spending is managed properly and balances are repaid in full each month, credit cards can be a useful addition to your wallet. Self-control shouldn’t prevent people from taking credit, but both consumers and lenders have a part to play in ensuring the experience remains positive.”
“Younger people’s growing understanding of credit scores and the impact of regular payments on scores is a positive development. A responsible approach to day-to-day finances and repayments can pay dividends when it comes to larger financial milestones, such as applying for a mortgage or car finance. Taking steps to improve your risk profile has long-term benefits, so it’s good to see people starting earlier in life.”
Equifax provides these tips for people to help manage their credit cards
- Don’t ignore problems –If you get into financial difficulty, the worst thing to do is ignore the situation. Make early contact with the organisation, as forming an agreed and structured repayment plan is the best course of action, rather than make no payments. The fact that an arrangement to repay has been made and minimum payments are received on time will be viewed positively
- Manage your credit limit –If an organisation increases your credit limit and you feel it is too high, make direct contact and ask to reduce it. It is typically not the size of the facility that is key to your credit profile, but the way you manage it (e.g. making payments every month or fully repaying every month)
- Close old accounts –If you go for 0% credit card deals, remember to close the old accounts after the balance transfer has completed – as this does not happen automatically. This proactive step removes the temptation for increased borrowing in future