Uncertain economic times mean we need to manage our money carefully, and 59% of the UK adults with an excellent credit score see their credit card as a method of financial security and credit building.
Are overdrafts a thing of the past? The fact that only 7% of the nation are currently using one suggests yes.
The relationship between credit cards, financial security and money management is in rude health according to research conducted by Vanquis Bank. The findings reveal that 59% of adults who classify their credit score as ‘Excellent’ feel more financially secure with a credit card, a suggestion that an awareness of money management techniques and the importance of credit is prevalent throughout the UK.
With the rising cost of everyday purchases, such as food and household bills, there is a growing need for the public to prioritise their financial future. Aside from seeking a wage increase, a popular method of planning for financial uncertainties is to build a positive credit score and credit history.
Vanquis Bank’s research reveals that the majority of consumers (58%) paying off their credit card in full on a monthly basis aim to build their credit score and credit history. Respondents who follow this approach to money management stated it provides them with an added sense of financial security.
However, even those who are able to live within their means each month can face an unexpected financial outlay from time to time. This could be anything from a car repair to the need to replace a major appliance within the home. It is in moments like this where a good credit score and credit history are extremely important, as they ensure that the correct funds are available to cover the immediate outlay.
The importance placed on building a strong financial foundation could be linked to the low level of consumers currently using an overdraft; according to the research conducted by Vanquis Bank only 7% of the nation are using one as a form of credit. This raises the question; are overdrafts becoming a thing of the past?
One potential response is that credit cards are considered a more appropriate method of money management for those making small scale credit purchases. A factor in this decision is that credit cards present more opportunity to positively impact credit score and credit history compared to an overdraft. It will be interesting to monitor whether the use of an overdraft declines in the coming months and beyond, and how changes to the economy impact this behaviour.
Overall, the research depicts that the UK is financially conscious and aware of the importance of responsible money management. Using a credit card for small scale purchases to build credit history is an example this money management technique.
Repayments are flexible and can be altered to suit monthly expenditure, for example, if an unexpected bill is received, only the minimum payment amount could be paid the following month.
A credit card is not suitable for long term borrowing or financing existing debt. Missing payments could have severe consequences and make obtaining credit more difficult.