To think most people don’t actually understand how to use credit and debt to their advantage?

[OneSpryCyanFox]

Credit cards and debt aren’t inherently bad - they can be powerful tools if used strategically. But so many people end up trapped in high-interest debt because they don’t really know how the system works. Shouldn’t financial literacy be a bigger priority?

If I buy everything on my credit card, and pay it all back on payday, is that helping my credit rating? x

Edit, I still have money left after clearing the credit card

Yes, paying off your balance in full each month is a great habit! It helps build a positive credit history without paying interest. Just make sure you’re not using too much of your available credit at once, as high utilisation can sometimes impact your score.

Everything goes on the CC and paid off at the end of the month. I find it so much easier to manage things that way. Plus I get cash back. Not too worried about my credit score, although I suspect it's fine.

🙌 thank you

I think your right though about financial literacy. I'm quite shocked sometimes when I hear about how some people manage money.

For example. To me paying down higher interest debt first is obvious, but a friend of mine said they planned too overpay the mortgage with a lump sum rather than paying long running CC debt at god knows what interest rate. It doesn't make sense. Ever. To do it. But it's astonishing how many people don't get the simple things.

I had to talk Ds through this, he finished uni and started a graduate job and needed to build his credit score. We had transferred his phone contract to him earlier even though we still paid it, just to him and he had the direct debit set up.

I had to talk him through the whole 56 days credit or whatever it is, I just know when my own credit card rolls onto the next month and when it is due for payment. Mine is paid off every month in full and has done for 25 years. It is a Tesco one so clubcard points have paid for hotels in the US, days out here ie Legoland, RAC cover, magazine subscriptions, Disney Plus. So they were always aware of the points but not the minutiae of how it worked.

He applied for a credit card and just buys his lunches on it, train tickets etc but it is set to pay in full automatically every month. However, we as a family have watched stuff on people in debt, spending habits and how long it takes to pay something off, wants vs needs. But then I have done debt collection as part of my job with income and expenditure forms so they know about that too.

I think it should be covered in school because not all people understand it. My children were told about some things but it was more what salaries can be earned with these jobs and what house can you afford? Most will be living at home with at least a minimum wage and so spending should be talked about.

Ive never owned a credit card and dont want one either.
Ive never rented large items.
I was raised to if you cant afford it dont have it if you can by it by it out right so you own it.

Using a credit card and not being able to afford something are entirely different things.

I would love to learn. Nobody has ever taught me how to use debt correctly or to my advantage but I’ve heard a lot about how it can be beneficial. Although currently my credit score is awful and I have some debt so I feel it’s too late. Definitely wish I was taught about financially literacy at school. I grew up working class with parents that settled and worked up in the UK that had the view of “you do not take any debt” so that belief has become my norm.

Not being able to afford something is not the reason why a huge majority of people use credit cards.

Plus, credit cards give you lots of protection on large purchases.

"Ive never owned a credit card and dont want one either."

But this may result in a poor credit rating if you needed to apply for credit/ mortgage in the future. Many people get a credit card just for the protection for online purchases then pay it off in full every month...

Commercial arithmetic should be on the curriculum. I thank my lucky stars I did it.

I think that every child should have lessons at school teaching them about basic finance.
As a person now claiming a pension I have had to learn so much about drawing a pension..an absolute minefield involving financial advisers which then costs 5% of my pension!

I remember my father keeping my mum in the dark about finances. She asked him to teach her for the year they lived together whilst she learned to work and balance a budget. I grew up watching her manage finances. I often take out a 0%interest cc and use it for the life of the contract. It is handy for the protecting it gives on purchases. But I wonder, will I stop being able to take these cards on once I'm retired?

I used my credit card for additional protection and to get cash back on major categories of spend. Direct debit set up to fully pay off every month.

I also grew up with the thought of don't buy what you can't afford and all credit is bad. After decades working in finance and years on MSE, I have learned that healthy credit use can be beneficial to the consumer. I've earned hundreds in cashback on my credit card and the same in interest whilst cycling 0% debt through credit cards.

To think most people on here don't ask about what most people do or not, I mean call me cynical

I understand credit cards and use them to my advantage - I think this is so important as my friend had literally no idea how much interest she was paying.

The thing I need to fully understand now is whether it's best to use spare cash to overpay my mortgage or pay more into my pension. Emotionally I feel I want to get my mortgage cleared ASAP but my brain says I would be better ramping up my pension contributions as my mortgage payments are manageable.

Financial literacy should really be taught in schools!

There are so many benefits to credit cards, as long as you are able to pay off in full each month. I use credit cards for everything, but always pay it off - we mostly use an Avios card, but I also have a JLP card for food shopping, things from JL and a card that doesn’t charge for use abroad.

It's all very well saying teach it in school but even sixth form don't want to hear about pensions..it's too far off, too irrelevant. I can think of about six lessons' worth of material that it would be useful to teach; what a credit score / record actually is, what helps and damages it, what an overdraft is, what a budget is, the difference between a DD and SO, car finance and insurance, something about legal liability for student rent and utilities in shared houses, the pros and cons of loyalty schemes, klarna etc but beyond that, I think they need to take responsibility as adults to find out stuff themselves. It's never been easier to do so and most people learn far more effectively about stuff when it's relevant to them. School can't do everything..this is on the same wavelength as teeth cleaning and hygiene..some things are simply not teachers' jobs.

@OneSpryCyanFox can I ask your advice, as you seem like you know what you’re talking about? I have recently transferred a 5k card balance onto a new 0% card. I have enough in savings to pay this off immediately, but the savings will earn 4% if I leave them where they are. Logic is telling me to pay minimum on cc and pay off the balance after 12 months. Am I missing anything, is this bad for my credit?

I agree OP, but surely other people being stupid helps the wise to get richer did I say that out loud 😂

@offmynut

They are separate things. I have a xiuple
of cc but just applied for a zero% for 21 months one. I have a large holiday coming up, I have the money for the balance but why would I not pay that on the cc and then leave the £6k in the bank earning interest for 21 months. I have done it before with home renovations.

i also get .5% cashback on my normal credit card purchase. Thats anything from £10-£20 a month straight back to me.

Same way I am signed up to airtime rewards and top cashback - it’s about being clever with how you buy stuff to maximise the benefit to yourself.

@offmynut So was I but credit cards paid in full cost you zero money. They also provide protection for many goods and services if a company goes bust. In the 30 years DH and I have had cards the points have paid for at least the following. Weeks car rental in America, few nights in Hilton hotels, visits to Legoland, seas life centre x 3, Weds Mids safari park x4, various other entrance tickets and car ferries, subs to BBC Good food mag and children’s National Geographic. Never paid a penny in interest. Plus DH has a card with cashback, rate was at one point 1%.

Also people need to know that all of the benefits of credit cards, building credit, credit scores etc etc does not apply to everyone. There are many countries where this does not apply, Ireland, Spain, the Netherlands and Japan to name a few. It’s not a one size fits all.