Money expert Martin Lewis is urging shoppers to ditch cash and use credit cards instead – to get better protection and money back on your spending.
Money Saving Expert Martin Lewis returned on his The Martin Lewis Podcast on Monday with a fresh batch of savvy advice for his listeners on BBC Sounds, Spotify and Apple Music.
There, he took a call from a listener called Phil, who asked him about paying off his mortgage. Following his question, Martin explained to Phil how paying for items on a credit card is actually better than paying in cash, assuming you are sensible enough to pay off the card in full every month.
Credit cards, Martin explained, give you protection on your spending and cashback on your purchases, both of which cash can’t do.
Martin explained: “Right now, there’s a credit card from Lloyds that pays you 1% cashback on all of your spending on it.
“Of course, if you were to borrow on it and you weren’t to pay that off in full at the end of the month, you would pay interest on it.
“But if you set up a Direct Debit to pay it off in full, you neuter its borrowing ability.
“…If you were to shift all your spending onto that card, then for every £100 you spend, they would pay you £1, and the money is paid every January.
“So instantly, everything is automatically £1 cheaper for you.”
Martin then added that credit cards also offer the best protection on spending, adding: “Plus, the second thing. You say you pay on cash. Paying on cash is the least protected way to pay. You have absolutely no protection if you pay on cash.
“Bank transfers are pretty bad, cards are the strongest. Debit cards and credit cards have chargeback protection but by far the strongest protection is Section 75 protection, and that only applies to credit cards and only to items £100 to £30,000.
“In most cases – and there are some exemptions – the credit card company is jointly liable with the retailer if anything goes wrong, or even if the retailer went bust you can go to the credit card company. Even if you only spent a penny on the credit card and the rest you paid for in cash.
“So for me, I do all my spending on plastic because I get rewards and because I get cashback and because I get Section 75 protection.
“The reason I normally say to people you shouldn’t do that is if you don’t trust yourself to have a debt machine like a credit card could be if you get it wrong and don’t pay it off in full in which case don’t do it. But you don’t sound like that type of person.”
Martin added: “For me, it’s not actually a debt card. I mean no more than a debit card is a debt card. Because if you have a debit card, you can go overdrawn on it.
“And that’s a debt card too. So if you have a credit card and it’s paid off in full and you’re getting cashback on it and you can afford to pay that then because there’s never any interest, as long as you don’t withdraw cash, I would say that’s your way to spend.
“So yeah, I would probably get rid of your mortgage, but maybe it’s worth thinking about not continuing only to spend in cash. Because you’re less protected and you’re giving up a 1% effective discount on everything you spend.”