Debt versus savings

The right time to borrow is definitely when interest rates are at their lowest, so if you have a credit card don’t rush to pay off your balance just yet, especially if you have money in the bank that means you are able to.

If you are in this situation it means you are at the very low-risk end of the borrowing spectrum, and using that borrowed money in this economic climate may well be more beneficial than using the money in your bank. But make sure that if interest rates do shoot through the roof or your circumstances change that you have a plan to clear your debts and remain in the ‘black’.

Long-term debt is said to be at one of the highest points in history across the UK, with the credit card companies doing little to address the issue. Any why would they? As long as their customers keep up minimum payments then they carry on making money.

With borrowing so cheap and a huge variety of companies, cards and offers to choose from, it is no surprise that people are tempted into the ‘buy now, pay later’ mentality of the credit card. This means that whilst credit cards have always been, and should always be, used for short-term debt, debts are being held for increasingly longer periods of time, with higher balances and less concern. On top of this, there is no incentive to save into cash accounts because of rock-bottom interest rates giving next to no return on your money.

Even with interest rates so low, saving should not be replaced with cheap borrowing. If you are keen to skip cash savings and avoid the cheap-debt trap, then investing offers an alternative savings route, of which you are all quite aware.