Do credit cards foster financial stability?


People who use credit cards on a regular basis tend to be in better financial health than those who rarely put their purchases on plastic. A new YouGov SixthSense report indicates that, rather than using credit cards out of necessity, many people now use them for routine purchases and pay off their balance in full each month.


One in three report regular credit card use
This latest report has shone a spotlight on the links between credit card use and financial stability. Researchers questioned more than 2,000 consumers about their relationship with credit cards. They found that 35% of cardholders used their cards at least once a week. A further 17% of respondents claimed to use their credit card two to three times a month, while 24% said they made credit card transactions just once every three months or less.

Frequent users report financial health...
When asked about the state of their finances, there were noticeable differences across the range of cardholders. Researchers discovered that high-frequency credit card users tended to be in better financial health than low-frequency users. For instance, 50% of people who used their cards at least once a week claimed to be in good financial health, while a further 40% were neither financially healthy nor in trouble. In contrast, a fifth of low-frequency credit card users said they were in 'slight' financial trouble, while a further fifth admitted that they were in serious difficulty and had missed bills and loan payments.

...and less debt
Furthermore, the poll revealed that regular credit card users tend to owe less money on their cards than low-frequency users. Cardholders who said they no longer used their cards typically owed £3,437, compared to an average balance of £2,881 for all cardholders.

The findings suggest that, far from being linked to financial difficulty and an over-reliance on unsecured borrowing, regular credit card use is actually associated with wealth. James McCoy, research director of YouGov SixthSense, pointed out that people with healthy finances can afford to use their credit cards as if they were debit cards. "The card can be used day in, day out for all types of purchases and payments can be made in time without having to incur charges or high interest payments," he revealed, adding: "This explains the link between high-frequency use and financial stability at a personal level."

Published: 11 November 2010