Open up your wallet and you’ve most likely got a well-worn debit card in there that you use for everyday spending.
Credit cards on the other hand tend to be reserved for big budget items: holidays, a new TV or, let’s face it, that ASOS order you can’t really afford.
But according to finance expert Martin Lewis, we’ve got it all wrong.
‘Many people tend to think “credit cards bad, debt cards good” but it just isn’t that simple,’ the money guru said on the latest episode of The Martin Lewis Podcast.
‘First of all, if you’re overdrawn, a debit card is a debt card too,’ he says. ‘A typical high street overdraft is at 40% annual interest, compared to a high street credit card at 25% annual interest.’
This means, as Martin says, ‘overdrafts are more expensive debt than credit cards.’
He adds that if you have to owe on one, ‘you’d be better to own on a credit card.’
In fact, Martin dubbed overdrafts on debit cards as ‘the big danger debt’. He said: ‘If you’re overdrawn debit cards are worse than credit cards, because the rate is higher.’
And while many people are put off spending on credit cards thanks to the notion that ‘if you haven’t got the money, you can’t afford it’, Martin says that doesn’t apply here.
‘All we’re saying here is shift your normal spending from [a] debit card to a rewards credit card.
‘You spend within your credit limit, you do your normal spending on it, you have a direct debit to pay it off in full.’
Not only that, but Martin reminded listeners that spending on a credit card comes with extra safeguards, as the credit card company is liable for the entire amount of any purchase between £100 to £30,000, so if something goes wrong, they have to help you out.
And, with the expensive Christmas season fast approaching, it’s worth taking his advice into account.
A survey found that around one in six Brits went into debt to pay for Christmas 2024, with many saying it would take around four and a half months to pay it off.
While it’s always of course preferable to budget wisely, if debt feels inevitable for you over the festive period, it’s worth switching to credit card spending, to avoid paying even more interest back.
Look to claw back some cash before Christmas? Check your student loan
In the latest Money Saving Expert (MSE) newsletter, Martin Lewis has highlighted new figures showing that a whopping 1.1 million UK graduates actually overpaid their student loans during the 2024/25 tax year.
When this is added to previous overpayment figures, it pans out that at least 5 million people across the country are due a refund of £100s or even £1,000s.
If you suspect this total may include you, rest easy, because the nation’s trusted finance guru has said it’s ‘easy’ to get your money back.
If you believe you’ve paid despite not earning enough during tax years up to 2022/2023, you can request a refund via the government website. Simply log in with your customer reference number or email address, password and secret answer to get the ball rolling.
Read Metro’s full guide on why you might have overpaid, and how to claim.
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