Martin Lewis, the renowned personal finance expert and founder of MoneySavingExpert, has recently issued an urgent warning regarding the use of debit cards over credit cards. Contrary to popular belief, Lewis explains that relying on debit cards for everyday purchases could leave consumers exposed to greater risks, hidden fees, and less financial protection—especially at a time when many face economic pressures and changes in bank practices.
Why Has Martin Lewis Issued This Warning?
For years, mainstream financial wisdom suggested that debit cards were always the safer and more sensible choice over credit cards to avoid debt. However, Martin Lewis warns that this is no longer universally true. His caution comes as consumers routinely use debit cards for both small and large purchases without understanding how this exposes them to:
- Fewer protections against fraud or faulty goods
- Potential for higher or hidden fees (particularly with overdrafts)
- Risks of overspending and being caught out by changes in bank interest rates on debit usage, which in some cases can now exceed credit card interest.
Credit Versus Debit Card Protections
One of Martin Lewis’s principal concerns is the difference in legal protections between debit and credit transactions:
- Credit cards: Purchases over £100 and up to £30,000 made with credit cards benefit from Section 75 of the Consumer Credit Act, which makes the card provider jointly liable for delivering goods or services. If something is faulty, doesn’t arrive, or the company goes bust, your credit card provider is obliged to help you get your money back.
- Debit cards: While there is the “chargeback” scheme, it is voluntary and not protected by law in the same way. Banks can refuse claims or be slow to act, leaving customers at a higher risk if their money is lost due to fraud or business failures.
Comparison Table:
| Feature | Debit Card | Credit Card |
|---|---|---|
| Legal protection | Voluntary “chargeback” | Mandatory (Section 75) |
| Fraud protection | Limited/reversal possible | Strong, fast, mandatory |
| Effect on credit score | None | Can help improve if well-used |
| Potential debt | Overdraft (can be costly) | Only if not repaid in full |
| Rewards & cashback | Rare or minimal | It can help improve if well-used |
The Hidden Cost of Debit Card Usage
Martin Lewis highlights a misunderstood risk: many people do not realise that overdraft interest rates on debit cards can now outstrip those of typical credit cards. Some banks have set overdraft interest rates as high as 39.9%, with fees accumulating quickly, which is often far steeper than most credit card APRs. People using debit cards who slip into unplanned overdraft could therefore find themselves paying much more in charges than if they had used a credit card and paid it off in full each month.
Furthermore, certain retailers now charge higher transaction fees for debit cards than credit cards, erasing the traditional cost advantage.
The Psychological Trap
Relying solely on debit cards can lull users into a false sense of security: “I’m just spending my own money, so I can’t get into trouble.” Yet, Lewis cautions, this overlooks the punitive consequences of overdrawing an account or the limited recourse available to victims of fraud or business insolvency. In contrast, a well-managed credit card, paid in full every month, allows users to benefit from stronger protections and sometimes rewards, with no financial downside.
When Credit Cards Are NOT “Bad”
Martin Lewis is keen to counter the enduring myth that all credit cards are “bad” and all debit card usage is “good.”
- A credit card that is used for larger purchases and paid off monthly can provide security rather than risk.
- The key is to avoid carrying a balance and always pay off the statement in full and on time to avoid interest.
Additionally, responsible credit card usage can help establish a positive credit history—potentially leading to more favourable rates on loans and mortgages in the future.
Risks and Remedies: What Should Consumers Do?
- Always repay your credit card in full every month. Set up a direct debit to ensure you never miss a payment.
- Only use credit if you’re confident you can pay it off without incurring interest.
- For smaller transactions where Section 75 doesn’t apply, use credit cards for convenience and debit cards only if you are certain you can avoid overdrafts.
- Consider specialist credit cards for travel and large purchases, which may offer fee-free foreign transactions or cashback rewards.
- Be wary of using debit cards for expensive purchases or where the risk of company insolvency exists, as you’ll have less protection if things go wrong.
The Bigger Picture: Changing Banking Practices
Traditional banking practice in the UK favoured debit cards for day-to-day spending, but Lewis’s warning is part of a broader recognition that banking fees, consumer protection, and fraud risks have all shifted. As banks quietly increase overdraft fees and merchants adjust transaction charges, consumers must stay informed and reconsider their payment options.
