> can't be overcharged, can't go below zero

In the UK, it's really hard to get a bank account where they'll do that. Instead they'll pay it, call it an "unauthorised overdraft" and then charge you for that. This is their business model - it's how they make sufficient income to operate.

There are "basic bank accounts" which don't provide a credit facility, but these only exist because people with poor credit histories can't get bank accounts otherwise, and the regulator has threatened to enforce their availability otherwise. However since this means that there currently isn't any rule, the banks make it very difficult for an ordinary person (with good credit) to open a "basic bank account".

“it's how they make sufficient income to operate.” No. This is how the practice parasitism on the poor.

To be clear, I don't agree with it, but it is how the current account market in the UK operates.

More information here: https://researchbriefings.files.parliament.uk/documents/SN03...

And a Supreme Court decision here: https://www.supremecourt.uk/cases/docs/uksc-2009-0070-judgme...

> In the UK, it's really hard to get a bank account where they'll do that.

I'm pretty sure all of them do, just ring up your bank and ask them to set your overdraft limit to 0

I've certainly done this with HSBC & Santander in the past, and when I got my Monzo account it was 0 by default (You had to sign up for an overdraft if you wanted one).

An overdraft limit of 0 just means that you end up in an unauthorised overdraft sooner.

Monzo might be an exception here.

> Never owned a credit card, don't have the slightest wish to do so.

I own a credit card, as you get additional consumer protections using a credit card rather than a debit card in the UK.

Pay it off in full every month. No problem.

Specifically, the main protection is that if you buy something that turns out to be faulty or the company never delivers the goods, you can get the money back without going to court. You get the money back even if the company goes bankrupt.

Some banks offer similar things on debit cards, but it's always at the banks discretion rather than required by law.

(*) over £100

It is an insurance policy then. Have you calculated how much this insurance cost you? Credit card fees, the inevitable 'forgot to pay it off' etc.

There is no "inevitable forgot to pay it off". Last century when I was old enough I got a credit card and the bank set it to automatically pay off every month. The bank says to itself, full balance of this account this month is say £462.83 and must be paid on or before the 7th of December, then it sets a transfer to occur from my checking account for the amount £462.83 on the 7th of December. No "forgetting" possible.

Indeed if say an IT problem occurs and they can't do that transfer under UK law they eat the fees incurred. "The customer must be made whole".

As to fees, the merchant doesn't have to accept cards, as we see with Amazon, if they don't like the fees. Why should ordinary consumers care? When we were part of the EU the cards couldn't charge excessive fees, now Brexit allowed them to unlock this potential source of profit.

In the UK, credit cards are free (some specialist cards aside), including an automatic direct debit so you never forget to pay it off, so you never get charged interest.

Never paid a penny in fees or interest in over 15 years.... and an annual statement of fees (issued by law) informs me of this fact each year.

Same in the US. Credit cards are so convenient and free and come with rewards. Of course most people don’t realize until they are older that all that ‘money back rewards’ was essentially paid by themselves originally, by the vendor paying the credit card company a fee on every transaction. The issue is that credit card companies build in requirements to be endorsed that they don’t charge different prices for cash only transactions often.

Yes. Anyone paying fees on a credit card should jump ship, that's a huge red flag. And I've made more in cash back rewards than I'll ever pay in interest.

The credit card fee is included in the price of the item, whether you use a credit card or a debit card, it's there.

In Europe just using debit cards is perfectly viable in 99% of the cases, however when it comes to car rentals you are still in some locations forced to provide a 'real' credit card.

I write 'real' since most of the FinTechs like Revolut, N26 etc often issue debit cards that may fail in exactly that situation. It doesn't help if your account is flush with 10k USD and a car rental could easily block 2k for claims on your debit card, some will just not accept Revolut & co. Thus I am always forced to carry an emergency backup credit card from a major bank just to be on the safe side...

Very much looking forward to the day some other means of international payment (crypto?) will be generally accepted.

I am so fortunate to live a in a truly free country that has not yet caved in to most of the western crap despite being a western first world country. Spain. Here the rental companies accept even cash, and the person who pays doesn't even need to be the same as the one who rents.

They require a credit card because credit card companies have robust ID and credit checking. If their ID checks weren't great, someone could steal the whole credit limit.

Banks and debit providers also do ID checks, as required by law, but don't check anywhere near as hard, since there is no way to steal money from the bank if your account can't go negative.

> Never owned a credit card, don't have the slightest wish to do so.

Bizarrely, never owning a credit card will negatively impact your credit rating.

I know this is a thing in the US, but in Norway where I am from it doesn’t matter. Nobody gets a credit card here improve credit rating. I doubt people do they in most of Europe.

When somebody does a credit check on you they don’t get a score, only a remark on whether that person has done any negative with respect to their credit worthiness. Thus there is really only the negatives which count.

In U.K. it definitely helps your credit score.

Except we don't have a "credit score" in the UK.

Credit reference agencies instead report credit history.

The difference is a subtle but very important one, as it allows companies to assess your individual circumstances, rather than base decisions on an arbitrary score.

The above misunderstanding is so commonplace that the Redit UKPersoanlFinace sub had (has?) a bot explaining this on every UK post mentioning 'credit score'. Here "credit scores" are instead a marketing gimmick launched by credit reference agencies to get consumers to subscribe to monitoring services. The 'score' they give is meaningless.

https://blog.moneysavingexpert.com/2021/06/martin-lewis-cred...

It works exactly like this in the US too. The numbers shown to consumers are not what big financial institutions base their decisions on.

By the same logic credit scores don’t exist in the US either. It’s just an approximation, your bank still makes their own decisions.

Credit "score" isn't exist here in Japan, but higher age and zero credit history is bad because they can't be distinguished to bankruptcy person.

I don't think that's really true outside of the US.

No, it's true in the UK.

I had this issue, and had to get a credit card and buy stuff on it for a year... basically without using credit you may not have a credit rating.

I always lose my cards and have to get them replaced, so have been back on just a debit card for a few years now.

That's odd, I got a mortgage approved at 19yrs old, in the UK, with no credit usage/history whatsoever. I had a credit card but I'd held it for about 3 months at the time, and have never used it to this day.

Only since then have I actually had anything on my credit report (monthly broadband payment, phone contract, monthly car insurance payment because I didn't want to keep paying the whole 3k up front every year after moving out, etc) and despite that the score has remained unchanged.

What was the loan to value though?

100%

Wait.. they loaned 100% of the property value to someone with not much of a credit history?

Yes, a few banks now offer 95-100% LTV mortgages for first time buyers.

In our case, the bank required a savings account containing a 10% deposit in the name of a family member, which is returned to them with interest after 3 years (unless you fall into arrears). ~50% of that money was our own savings and the rest was from parents savings, which allowed us to get on the property ladder with ~1yr less saving and no cost to our families after the 3yr period.

Can second this.

I had to get a credit card as mortgage got denied because my credit record didn't exist. Three months after the card, I got approved.

This is despite me earning an extravagant wage relative to my age for over a decade and never missing rent/utilities/council tax.

Bad system.

I think this is being misstated by GP.

It isn't that a lack of credit card hurts your credit rating, but that a lack of any credit hurts your credit rating in Canada or the US.

There are other ways to get an initial credit rating than a credit card, although I agree that this is the path most easy, and chosen by many to get that first rating.

The method I employed, was to buy a car and had a parent cosign. I made all the payments, and this was enough to kick start, and give me at good credit rating.

Ah but, for most people it's easier to get a low-limit credit card in the UK, than it is to get any other unsecured loan.

I also didn't say 'you need a credit card to get a good credit score', I said not having one will negatively impact your score. This is 100% correct; Your credit score is made up of various metrics on how you manage debt, one of which is credit cards. You will get a % boost if you have a card that you manage well, whereas without a credit card, you will get no boost at all in that category. Granted, you may make up for it overall in other categories, but in the main, for most people, my statement still stands. Credit scores start at 0, and only improve if you show you can manage debt across multiple products.

Hmm. I think the issue here is, we are all in different regions. Not only does the country matter (Canada here), bit the region too (Quebec, Napoleonic civil code, and provincial laws).

Credit bureaus are definitely legislatively controlled here, and court decisions have an effect on them too.

You can use direct debits instead of loans and are available for a really wide variety of payments, so is easier and safer than getting a credit card for many people.

Not only this, but getting a credit card and not using it can cause an issue for your credit, so it's better to setup direct debits and other forms of credit than it is to get a card you never use.

Citation needed. In the US anyways, a low utilization rate is actually a (minor) good thing for your score.

Considering the article is about the UK, I'm not sure how relevent US utilisation is in relation to it.

That aside, I didn't say low utilisation, I said no utilisation. This has a good chance of your card being cancelled by the card issuer, which has a negative effect on your credit.

Bottom line is, unless you plan to use the card, there are better methods of increasing your credit score, so it's not a good idea to get one.

The issue isn't not having a credit card, it's never having used any credit to create a good credit history. Setting up a few direct debits should work in lieu of getting a credit card.

The way this works in the US is nuts. I had to get a parent to co-sign the loan for my first car (or else they wouldn't lend me money at any rate), but then I spent a year paying a monthly fee to borrow my own money with a "secured credit card" and instantly I'm good for 40 grand, apparently.

That's not how it works in the US currently. You go through that process to get your first credit card, yes, but you do not get approved for $40k. My first card was $500. My best one now (with excellent credit score) is $5k IIRC.

If you got approved for $40k, there's something else funny going on.

Isn't it completely rational from the lender standpoint? First they make sure you will be profitable for them (involve other people who can be milked), then they offer you money and hope you can't pay back on time.

I mean, maybe, but it didn't work; I'm one of those deadbeats who makes all the payments before they're due.

Expecting someone to lend you 6 figures when you've never displayed any ability to repay 2 is far more bizarre.

Maybe you displayed the ability to not go into debt unnecessarily, which could be also a signal of financial ability. Getting into debt just to demonstrate you can pay it off is a bit like having to catch a virus so that the doctor can tell you you're healthy once you're done with it.

But it's true that in the era of negative interest rates, only silly people don't owe money.

I guess using the analogy — your doctor won't tell you "you've a great immune system" if you've never caught a bug at all. Maybe you've a really weak immune system, they just don't know.

Not going into debt unnecessarily is a great thing, but it's not a data point in your favour, it's the absence of a data point.

A credit rating basically isn't considered for a mortgage in the UK. They will check a report, and maybe request you pay outstanding debts (I was asked to clear my CC balance before completion both times), but unless you have a fraud marker or are bankrupt it won't affect you. Mortgages are secured on the asset, so it's far less risky than a personal loan of 5x less - the bank can seize the asset and force the sale of the home (and that difference in risk is reflected in the difference in borrowing rates).

My experience is they do indeed dig into your credit report and will approve/deny based on it. Not sure where your information to the contrary comes from?

https://www.which.co.uk/money/mortgages-and-property/mortgag...

They explicitly mention a report. It’s just the number rating which is irrelevant.

Most UK CC T&Cs state explicitly "If you have a home, we will go after it if you default." Personal loans have similar recourse.

Neither are truly unsecured. It just takes longer than an outright repossession because it takes two or three court claims instead of just one.

The debt collection industry relies on this, and regularly forces sales of property to pay back CC and other debts.

So CCs are disastrous for people who can't pay their debts. Not only are the interest rates extortionate, but for lenders they're almost as safe as a secured loan. And because of the high rates they can be considerably more profitable.

Such a broken system.....

I have to spend everything on a credit card, then when i get home from shopping 45 minutes later go and pay it off using a debt card.

Its so unfriendly for the consumer.

I've not seen a credit card where you can't automatically pay the full balance by direct debit each month. You do still have to do some maths (actual balance = current account balance - card balance) but I don't worry about it not being paid off.

Why not rely on direct debit to pay the full balance?

Poor management on my part, i'd rather know its done and keep a watch on my spending day to day.

Which demonstrates that you in fact are bad with money, so the system is working as intended. If you don't trust yourself with day-to-day spending, why should a lender trust you with a loan representing months or years of income?

Oof.... OK mate.

Keeping an eye on my spending and borrowing on a daily basis is now a negative?

I assume you sit in the same camp that thinks i can afford £1400 monthly rent for 5 years but not an £800 mortgage yeah?

Keeping an eye on your spending is great, but you can equally do that with credit; it's easy to look at or download transactions in your credit card app or website. Unless of course you don't trust yourself not to overspend, in which case my point stands.

You are aware that interest rates have been incredibly low for years? They have to go up to keep a lid on inflation, and the BoE needs to be able to do that without worrying about mortgage borrowers being overstretched.

Same here, it's unnecessary overhead.

It's more correct to say that never having any credit facility negatively impacts your credit rating. I have a credit card now, but several years ago I didn't, and I had a perfect credit rating, by dint of the multitude of other credit agreements that I had for the general running of my life, like mortgage, telephone, internet, etc.

Not in the UK

>>one for receiving money,

What do you mean debit card for receiving money? In what sense?

>> Automated payment from the 1st one to the 2nd one

Again, I have absolutely no idea what you mean by that. Payment from a debit card to a debit card? What?

I guess he's trying to compartimentalize so that, if the spending account is compromised and depleted, the main-income one is untouched.

Seems like a lot of work to do what CCs do automatically. I guess the upside is that crazy spending is impossible (well, if you make sure to forbid negative balances on the spending account) and it's impossible to accrue interest.

> well, if you make sure to forbid negative balances on the spending account

I'm unaware of a UK bank that will let you do this, so...

Monzo. It's the default in fact, since in order to get an overdraft you need to do a credit application.

There's a difference between having an arranged overdraft, and being able to have a negative balance (also known as an unarranged overdraft).

Monzo's own help pages explicitly state that your balance can go into the negative, because offline debit card payments will not be rejected. They'll also gladly take you into the negative if you owe them money (e.g. through a Monzo Plus or Premium sub, or use their Flex service).

Search Monzo help for "Unarranged Overdrafts".

As far as I'm aware, there is no UK bank that will guarantee they will reject all payments and never let you go into a negative balance on a debit card transaction. This is also a profit centre for them, so there's little motivation to actually do so.

Here's the help page in question:

https://monzo.com/help/overdrafts-loans/unauthorised-overdra...

The mandated fee-cap introduced a few years ago has (or rather should have) curbed the view that overdraft fees are a cost centre. Banks are extremely proactive now, as soon as there is a hint you'll go in the red they'll ping you in a bunch of ways and remind you of what you can and cannot do; so I wouldn't exclude that some (or all) might now refuse to complete purchases when it would push you too deep into unarranged territory, because they cannot charge you more than a fixed amount, so it would become basically a free loan.

I'm with Barclays and Lloyds, and neither can go into negative(well, technically they can I suppose, but it's extremely hard to do. Any debit card or direct debit transaction will just get declined if it's about to go below 0).

any offline transaction under your floor limit can put you into unauthorised overdraft

e.g. a train ticket purchase from a guard using a mobile terminal

I haven't lived in Europe for a while but it used to be common to issue online-only debit cards (VISA Electron, Maestro etc) for this reason, have these fallen out of fashion?

they were common for a bit in the 2000s (mostly with kids), then seemed to go away for a while

they were very easy to spot as they didn't have the raised digits (for the imprinting machine... old fashioned offline transaction)

now they're coming back again, but still not super common

it is possible if a terminal accepts a transaction without connecting to the payment processor (small, contactless transactions can do that).

Multiple bank accounts, each with it's own associated debit card

If you only have a bank account for receiving money, then you don't really need a debit card for that bank account.

I take it they're separate accounts.

You can basically just sign up for an account with Revolut, Monzo, or Starling and use it purely for spending.

Keep your primary account for getting paid, and for covering bills, then load up the second account with play money for the month.

I know a few people who do this.

I just use an AmEx account but it's a little frustrating that you can't set a spending limit on the card.

Yeah, that makes no sense?

The flip side to this is using something like an Amex which offers insurance, points, business lounge access and much more. Set up the card with diret debit (much like your automated payments) and never spend above what you can afford.

You now have perks, points, insurance, consumer protection and still zero worries.

It's pretty expensive to have an Amex card, I had one for a bit, but ended up not really using it so the £ they wanted seemed like a rip-off in the end.

There are many amex cards which don't have any fees, they even have a filter for them on their website [0]

https://www.americanexpress.com/uk/credit-cards/all-cards/?i...

Amex is terrible card in EU. High fees, many places rejecting it, I see no real reason why to use Amex over Visa or Master/Maestro

The link I shared is a list of cards from Amex that don't charge any fee. Anecdotally the number of places that reject my personal amex is very close to zero (there's one cafe enar me which doesn't take it).

> I see no real reason why to use Amex over Visa or Master/Maestro

Cashback/rewards, and it's accepted on Amazon in the UK after this year is a really good reason to use it over Visa at least. Maestro is non-existant in the UK. Maybe mastercard is a better choice, but I carry two cards _anyway_ , so one might as well be an Amex, and the second should be a mastercard?

Majority of hotels around Europe don't accept it, same with restaurants, small business, shops.. there is not a single reason to own one in Europe, even with cashback (cashback to what actually, since i cannot use it anywhere)

I've travelled around the UK, Ireland, France, Spain, Italy and almost exclusively used my Amex over the last 5 or so years.

> Majority of hotels around Europe don't accept it, same with restaurants, small business, shops

I completely disagree. Almost every restaurant, hotel, cafe takes it. All major airlines accept them, the major train operators accept them, the major hotel booking sites and airbnb both accept it.

> there is not a single reason to own one in Europe, even with cashback (cashback to what actually, since i cannot use it anywhere)

Well there is, cashback, and contrary to what you're saying it _is_ usable in europe. You can book a flight with Ryanair, a train on trainline, hire a car via hertz/sixt/europcar, book a stay with airbnb/booking/hotels, and eat out in restaurants and local cafes all with an amex.

I spend on business travels around Europe 1/4 of the year, 2 years ago we were moved from Visa to Amex and the company reversed the move after 1 month back to Visa. Couple of major hotel chains didn't accept the Amex. In Dublin specifically I had huge issues with Amex, not to mention Germany and Scandinavia. It was just bad experience all together

1.25% cashback.

Mine's free, and they pay me cashback every year (which is of course mainly paid by companies like tesco and amazon as part of the fees)

You are paying for these "perks" and no I don't need insurance when I'm buying an electronic toothbrush from Amazon thank you very much.

> You are paying for these "perks"

Everyone is paying for the perks, since prices are the same for everyone, but only the people with a credit card are getting them.

You're paying for their perks every time you buy with a debit card - it's madness to use debit.

Unless you are getting a discount for paying with a debit card, you are paying for these perks too.

not typically unless you carry a balance. The merchant pays regardless if you use a credit or debit card, only the rate changes.

You could just automate payment of your credit card bill and get all those benefits plus more consumer protection.

What about all the free money you're leaving off the table in miles and cash back? I've had a credit card for about 3 years, and while it isn't much, I've never paid a dime in interest and I'm up roughly $800.

Perks on credit cards in the UK are almost non existent because the fees are so low compared to he US. Historically the EU regulated to crush credit card transaction fees.

That said, I do get annual cashback of 1% on one of my cards.

Cashback perks aren't great, but the airline credit cards are quite good if you'll definitely use the miles.

We use a card that gives generic points instead of airline miles on each dollar spent and those points pay for our vacation lodging each year.

Big corporations giving people free money sound kinda unbelievable, don't you think? They must actually make money on card holders for this to be profitable. The obvious way is that some people will overdraw sooner or later, the other is that people with credit cards simply tend to spend more (some say about 10-15%). The average credit card debt in the USA is more that 6000$.

The "average credit card debt" is a bit difficult to really measure. That isn't necessarily the amount of interest bearing credit card debt which IMO is the real concern.

I've have some credit card debt, none of it carries any interest. When I buy appliances or furniture I usually take the interest free financing despite having the ability to pay. Why pay a few grand today when you can spread that out interest free for 2 years and let that value appreciate? I would have lost out on tons of money if I had sold investments up front to buy those goods. So instead of getting rid of all that money a year ago, I got 30% gains in the market.

> you're spending your own money

I can’t even begin to imagine how you could see this as an advantage. It’s really not.

Don't most people do this with a credit card they pay off most months? This is what I do plus credit cards give more protection than debit cards.

I have the majority of my net worth invested at one of my brokers and I tend to hold minimal cash in my bank account...better to be invested than hold cash these days.

How is this better than having a single credit card that gives you automatic protection and insurance on everything that you buy without having to think to stay under your self imposed limit otherwise you have to manually top up the card with the amount that you need to spend?

You can set it up more easily in Europe, getting a credit card is not as easy here.

> can't be overcharged, can't go below zero,

...and can't get a mortgage and buy a house because you have no credit score.

This happened to me (for clarity: in the UK) and I had to get a credit card and use it for a year.

No idea where the card is now, but the credit systems seemed to become aware of me after that.

You don't have to have running shoes to be able to run. I haven't owned a credit card for 15 years and my credit score is just fine.

That's not how it works in the UK though. You need to be having credit in order to build up credit score.

Sure, I've taken out loans, had several mortgages, multiple bank accounts, paid all my utility bills. All of that can influence your credit scores.

It is possible some people could have so little credit history that having a card for a while might be beneficial. I don't know enough about the system to be sure, so maybe I was being a bit flippant, for which I apologise.

That only applies to the US.

It's wildly overstated in the US. Having a CC and not paying it off in a timely manner definitely affect your score but the difference between having a card and not having one isn't as big as people make out.

If you have proof of income you're going 90% of the distance.

Nope, that also applies in the UK.

Do UK credit cards typically offer cash back?

In the US, 2%+ on all purchases (either directly or through points) is pretty standard. Going up to 5%+.

But I know this can be very different in other countries. I believe Japan has little to no incentives?

amex does this in the uk

My mom has exactly the same system with her two debit cards and I have not taught her that - she is naturally smart. So proud of her and you too ;) Cheers!

90% of this is what a credit card already is... the only tricky thing is the limit which might not be as easily configured, but it certainly can be.

Your plan might work with a pre-loaded credit card