I have never paid a penny in credit card interest, in fact I have even used cards to increase my savings by taking advantage of interest free periods and linked high interest savings accounts. I have no personal issues with them as an aid to budgeting.
But this doesn't mean that I'd don't think they are very dangerous. We all know how easy it can be to get caught in the "minimum payment" trap, and how many people do so.
TOTAL CREDIT CARD DEBT IN NOVEMBER 2014 WAS . PER HOUSEHOLD THIS IS – FOR A CREDIT CARD BEARING THE AVERAGE INTEREST, IT WOULD TAKE TO REPAY IF YOU MADE ONLY THE MINIMUM REPAYMENT EACH MONTH. THE MINIMUM REPAYMENT IN THE FIRST MONTH WOULD BE , BUT REDUCES EACH MONTH. IF YOU PAID £55 EVERYMONTH, THE DEBT WOULD BE CLEARED IN AROUND .
(The Money Charity)
The problem is made much worse by the fact that people who should not be given credit are routinely allowed to take out several cards in the full expectation that they will not pay off the debt and will be caught in this trap. Personal responsibility is one thing, and of course it's relevant here, but surely the financial sector should be more highly regulated. This much personal debt can't be good for the economic (or psychological) health of the nation.
The other side of the coin is the fact that having no credit record can be a real problem and the easiest way to get one is to get yourself a credit card. People who worry that they will not be able to manage a card and that they will be tempted to overspend have to work round this, or give in and get one.
I have had reason to think about these things recently because someone close to me has just revealed that they have a very large credit card debt that they can see no way of paying. The all round worry and distress that this is causing (and has been causing for some time) makes me very angry because it isn't debt built up buying expensive holidays and meals out. It's debt built up due to a low income combined with very high energy bills and the fact that living just a little over income has been turned into a big debt by interest-greedy card companies. I know that debt like this doesn't happen unless someone isn't in control of their budget (as we all should be) but personal failings in this area should not be allowed to become someone else's (large) profit margins. It simply isn't an ethical business model.
In other news, but also credit card related, I have been thinking about my own credit card spending and I have come to the conclusion that I should be keeping more of an eye on it. We pay for most things on credit card. In fact everything goes on them that isn't paid for by DD or SO (we have 2 cards each) and we generally use them in preference to cash wherever possible. Given that this is the case you would presume that I know what % of the spending goes where? Wrong. I really don't know (although I do guess - not quite the same thing :-)) and I've been recently been prompted by TFSs Bloodbath post to find some way to check this out. (It's highly likely that my socialising spending is way up there too - maybe some way beyond.)
I am working towards a retirement "Number" that is based on what we spend now (minus savings and pension payments) which works out at £2380 per month. The credit card bills currently make up between 40% and 70% of that figure. It varies so much because we use them for holiday payments etc. I have stuck a pin in a number somewhere in the middle and assessed what we are spending as £1450 on "average". But I'm not even tracking this so how can I know? There's a big gap in my budgeting here that I need to address.
Yet another spreadsheet I'm afraid. But, in the light of recent experience, credit card spending is one area that definitely needs constant care, control and containment.