Which Comes Up Trumps: Cheques or Credit Cards?

by : Andrew Regan

Writing a cheque for goods or to settle a bill is rapidly becoming a thing of the past, according to the payment clearing association APACs. Their figures show that only one in ten non-cash transactions are now completed by cheque, compared to over half in 1990. Debit and credit cards are now the top choice amongst UK payers and their usage continues to grow in popularity. And it will only get worse for cheques as APACs predict that usage will dwindle to less than 3% in 2016. Spokesman Simon Bennet said:

"The availability to pay by alternative methods such as plastic cards has grown so dramatically that people find it much easier to use their debit cards than to write out a cheque ... Small businesses prefer to use cheques when paying out because it means they can have money in their bank account for slightly longer, but they like to receive income by quicker methods like cards."

Bennet also points out that cheques are almost never used by the young, with businesses and those over 60 still most likely to pay with one. For the elderly, writing cheques is a habit; for businesses it is an accepted practice to improve cash flow. Similarly, for the younger generation, writing a cheque is just too time-consuming.

However, shrewd and disciplined credit card users can not only improve their personal cash flow - they can also get handsome rewards if they choose the right credit card and use it wisely. Many UK credit card companies have loyalty schemes where customers gain rewards, such as Nectar points or Air Miles, by spending on their cards. The mechanics of paying a credit card bill also mean that it is possible to pay for just about everything on the card, keeping the cash in the bank until the payment is due, meaning that the card holder wins twice!

In addition, most utility companies now offer discounts to customers who pay monthly by direct debit, debit card or credit card. This has led to some credit card issuers and companies offering joint loyalty programmes where the payer gets loyalty points from both the issuer and the company with which they are settling their bill. Indeed there are many people who pay off their entire credit card balance each month who look for such loyalty schemes when they compare credit cards and the benefits they offer.

With such schemes and the ability to defer payment for up to 56 days it is easy to see why credit cards offer even better cash flow and benefits than writing cheques when used responsibly.