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I don't understand debit culture in the UK I'm an American who has a Monzo card and has spent a fair amount of time in London. Why don't people use credit card

I don't understand debit culture in the UK I'm an American who has a Monzo card and has spent a fair amount of time in London. Why don't people use credit cards???? The rewards are usually pretty good and as long as you pay off your balance every month, you're getting ~3% of your purchases back in rewards/credit I stopped using Monzo because there are no rewards! Sure it gives me notifications and is easier to see my balance/add money than my Barclays account, but what is the point of the good UX/UI? Is it for fraud detection and making sure the merchants/bank aren't cheating you? I ended up going back to using my oyster card/barclays card when contactless was the only option, and credit for everything else. Transferwise was also a godsend for converting money with clear visibility into the exchange rate/no fees I agree that Monzo has been a great catalyst for UK banks to get their shit together on mobile apps etc. but there is nothing fundamentally different about their business...they're a debit-only bank with no physical presence and a nice app - and why don't more people use credit cards instead? Is it because it makes P2P transfers easier than the archaic bank transfers?

baby 8y ago
I'll try to provide an answer, as I'm European but moved to the US. We don't have this "you're in debt" culture that I think you create when you start school in the US. Very early you have to take a loan in order to study, which facilitate the idea of owing banks. I opened a secured card here in the US, but I never use it, because it just feels weird to "owe" the bank money and not to be able to pay it back as fast as I can. I usually have to wait for the end of the month, and if I mess something up then I have to pay huge fines (that you cutely call APR). The more you get into this system, the more you seem to collect credit cards. I have friends with dozens of them. What happens if you lose one? Or if you get your wallet stolen? Or if you forget that after the first year you start paying fees on it? etc. Most of us can live without the rewards if we get other benefits. For example with Monzo, you get added security, you can use it all over the world for free, you can send money to your friends or split the bill easily, you can track your finance, set limits on your budgets, see what was that 30$ you spent a month ago and where it was, round up your purchases to save money, etc. There's just so much benefits that you end up using it all the time as your default card. That's how they get you I guess. But it's so much more practical and easy to use that people have fell in love with their branding as well.
- jspash 8y ago
  "people have fell in love with their branding as well" This is what I struggle with understanding. Maybe it's because I'm from a "slightly" older generation. But I've watched my younger colleagues one after another get Mondo(Monzo) cards and I've quizzed them on why they switched. The answers came in two categories a) because it has an app and b) dunno? because everyone else has one. So...I'm still stumped for a good reason to switch. But kudos to the company behind this because I do appreciate the fact that it seems to have been a kick up the backside of ye olde guard.
  - baby 8y ago
    Getting a card is free and simple, I suggest trying it and closing your account (which is easy as well) if you don't like it.
- giobox 8y ago
  > We don't have this "you're in debt" culture that I think you create when you start school in the US. I think an entire generation of students in England and Wales who now are paying up to £9000 per year of study would likely disagree with this. While this is still less than many US examples, it's still a ton of debt for the average UK student who is unlucky enough to have an English or Welsh postcode (Scotland continues to offer free higher education). Especially so when you consider average graduate salaries in the UK.
  - jaziek 8y ago
    The big difference here is that student loan repayments are based entirely on your future earnings. It is, for all intents and purposes, a graduate tax. The majority of people will not pay off their loan before it is forgiven, and many will never pay anything at all.
  - M2Ys4U 8y ago
    Student loans in the UK aren't real debt, though. It's more of a defined-contribution graduate tax with repayments contingent on earnings.
djhworld 8y ago
I'm from the UK and I use my credit card for 99% of my discretionary spending, mainly for the perks, but also section 75. So the features in these challenger banks are largely useless to me, and I track all my finances elsewhere anyway However, you can't put everything on a credit card in the UK, like household bills and rent, so you still need a current account for this. I use my Starling account for this and it works fine. Some people don't have financial discipline so I'd imagine the credit card might lead to temptation, so they stick with a debit card to know exactly what's going on.
- somabc 8y ago
  I find Curve to be more innovative because it is a debit card that links back to any debit or credit card. You can only carry one card, use your real credit cards in places that only accept debit. Plus - a fancy app and real time tracking for all your old bank cards. It's most of the upside from Monzo with your choice of cards.
techsupporter 8y ago
> The rewards are usually pretty good and as long as you pay off your balance every month, you're getting ~3% of your purchases back in rewards/credit So far as I’ve seen, most credit cards issued in Europe don’t have huge rewards like that because card networks are capped in how much they can charge merchants for card processing. Add into that a penchant for not acquiring open-ended (revolving) debt, and there you go. Remember that those rewards in the States are paid for by relatively high processing fees charged to merchants (2.5% plus a flat fee of around a quarter) and the interest paid by people who carry balances. And that interest rate is regularly in the low to mid 20% annual rate range.
- chrisseaton 8y ago
  > So far as I’ve seen, most credit cards issued in Europe don’t have huge rewards like that They do in the UK, which this article is about.
felixangell 8y ago
I have the best of both worlds here where all of my amex credit bills come out from my Monzo account and my salary is paid into my Monzo. The other features of the bank are what appeal to me personally, the fact that the UI is so much nicer to use than most other banks, as well as they are pretty progressive in terms of features. I can see when my credit card bills will come out (it warns you a few days prior with an estimated amount of the bill), and I can see rundowns of my spending, etc.
- Shoue 8y ago
  How does that work? Do you still get the purchases listed in Monzo somehow or do you mean you only pay the negative balance of the Amex card?
giobox 8y ago
I’ve always found this bizarre as well. The amount of air miles/cash back/whatever my U.K. relatives leave unclaimed by purchasing everything on debit cards is nuts to me, not to mention the extra sales dispute options a credit card provides, often free insurance for rental cars etc. The “Europeans are debt adverse” argument doesn’t really make sense to me either - if you clear your credit card balance each month this is in practice much the same to you as having purchased the same goods on your debit card, just minus many kinds of rewards or benefits. The amount of money I receive in cashback via credit cards largely dwarfs any kind of interest I make on the cash in my household spending current account.
rleigh 8y ago
I don't use a credit card. I'm also 100% debt free. I don't purchase anything I can't afford up front. I'm also British. I don't agree with the "rewards", which seem like a massive scam, which rips off everyone though higher prices irrespective of whether they pay by credit card or not, and I refuse to be a part in that. I likewise refuse to bother with any other dodgy scheme like mail-in rebates. Charge me a fair price up front, and I'll pay it in full, there and then. No silly financial games.

baby 8y ago

I'll try to provide an answer, as I'm European but moved to the US. We don't have this "you're in debt" culture that I think you create when you start school in the US. Very early you have to take a loan in order to study, which facilitate the idea of owing banks. I opened a secured card here in the US, but I never use it, because it just feels weird to "owe" the bank money and not to be able to pay it back as fast as I can. I usually have to wait for the end of the month, and if I mess something up then I have to pay huge fines (that you cutely call APR). The more you get into this system, the more you seem to collect credit cards. I have friends with dozens of them. What happens if you lose one? Or if you get your wallet stolen? Or if you forget that after the first year you start paying fees on it? etc. Most of us can live without the rewards if we get other benefits. For example with Monzo, you get added security, you can use it all over the world for free, you can send money to your friends or split the bill easily, you can track your finance, set limits on your budgets, see what was that 30$ you spent a month ago and where it was, round up your purchases to save money, etc. There's just so much benefits that you end up using it all the time as your default card. That's how they get you I guess. But it's so much more practical and easy to use that people have fell in love with their branding as well.

jspash 8y ago
"people have fell in love with their branding as well" This is what I struggle with understanding. Maybe it's because I'm from a "slightly" older generation. But I've watched my younger colleagues one after another get Mondo(Monzo) cards and I've quizzed them on why they switched. The answers came in two categories a) because it has an app and b) dunno? because everyone else has one. So...I'm still stumped for a good reason to switch. But kudos to the company behind this because I do appreciate the fact that it seems to have been a kick up the backside of ye olde guard.
- baby 8y ago
  Getting a card is free and simple, I suggest trying it and closing your account (which is easy as well) if you don't like it.
giobox 8y ago
> We don't have this "you're in debt" culture that I think you create when you start school in the US. I think an entire generation of students in England and Wales who now are paying up to £9000 per year of study would likely disagree with this. While this is still less than many US examples, it's still a ton of debt for the average UK student who is unlucky enough to have an English or Welsh postcode (Scotland continues to offer free higher education). Especially so when you consider average graduate salaries in the UK.
- jaziek 8y ago
  The big difference here is that student loan repayments are based entirely on your future earnings. It is, for all intents and purposes, a graduate tax. The majority of people will not pay off their loan before it is forgiven, and many will never pay anything at all.
- M2Ys4U 8y ago
  Student loans in the UK aren't real debt, though. It's more of a defined-contribution graduate tax with repayments contingent on earnings.

djhworld 8y ago

I'm from the UK and I use my credit card for 99% of my discretionary spending, mainly for the perks, but also section 75. So the features in these challenger banks are largely useless to me, and I track all my finances elsewhere anyway However, you can't put everything on a credit card in the UK, like household bills and rent, so you still need a current account for this. I use my Starling account for this and it works fine. Some people don't have financial discipline so I'd imagine the credit card might lead to temptation, so they stick with a debit card to know exactly what's going on.

somabc 8y ago
I find Curve to be more innovative because it is a debit card that links back to any debit or credit card. You can only carry one card, use your real credit cards in places that only accept debit. Plus - a fancy app and real time tracking for all your old bank cards. It's most of the upside from Monzo with your choice of cards.

techsupporter 8y ago

> The rewards are usually pretty good and as long as you pay off your balance every month, you're getting ~3% of your purchases back in rewards/credit So far as I’ve seen, most credit cards issued in Europe don’t have huge rewards like that because card networks are capped in how much they can charge merchants for card processing. Add into that a penchant for not acquiring open-ended (revolving) debt, and there you go. Remember that those rewards in the States are paid for by relatively high processing fees charged to merchants (2.5% plus a flat fee of around a quarter) and the interest paid by people who carry balances. And that interest rate is regularly in the low to mid 20% annual rate range.

chrisseaton 8y ago
> So far as I’ve seen, most credit cards issued in Europe don’t have huge rewards like that They do in the UK, which this article is about.

felixangell 8y ago

I have the best of both worlds here where all of my amex credit bills come out from my Monzo account and my salary is paid into my Monzo. The other features of the bank are what appeal to me personally, the fact that the UI is so much nicer to use than most other banks, as well as they are pretty progressive in terms of features. I can see when my credit card bills will come out (it warns you a few days prior with an estimated amount of the bill), and I can see rundowns of my spending, etc.

Shoue 8y ago
How does that work? Do you still get the purchases listed in Monzo somehow or do you mean you only pay the negative balance of the Amex card?

giobox 8y ago

I’ve always found this bizarre as well. The amount of air miles/cash back/whatever my U.K. relatives leave unclaimed by purchasing everything on debit cards is nuts to me, not to mention the extra sales dispute options a credit card provides, often free insurance for rental cars etc. The “Europeans are debt adverse” argument doesn’t really make sense to me either - if you clear your credit card balance each month this is in practice much the same to you as having purchased the same goods on your debit card, just minus many kinds of rewards or benefits. The amount of money I receive in cashback via credit cards largely dwarfs any kind of interest I make on the cash in my household spending current account.

rleigh 8y ago

I don't use a credit card. I'm also 100% debt free. I don't purchase anything I can't afford up front. I'm also British. I don't agree with the "rewards", which seem like a massive scam, which rips off everyone though higher prices irrespective of whether they pay by credit card or not, and I refuse to be a part in that. I likewise refuse to bother with any other dodgy scheme like mail-in rebates. Charge me a fair price up front, and I'll pay it in full, there and then. No silly financial games.