Plastic Fantastic: Britons Owe £9B In Interest As Credit Card Limits Decrease

19 March 2009

The dependence of Britons on plastic money was revealed in a recent study by Abbey, showing that Britons owe £9 billion in credit card interest. More than 60% of Britons have a credit card, and of these people, only 36% are regular payers that clear their balance at the end of the month. Up to 40% have accumulated debt for more than a year, while 22% have done so for a period of at least four years.

The Credit Card Crisis

As financial companies strive to maintain solvability in these dire economic times, they tend to limit their risks. Most firms are a thousand times more cautious in lending out to people now, than they would have been a few years ago.

The result? As banks and other institutions slash the credit limits of customers in an attempt to control their own risk of losses, customers are seeing their credit limits plunge from £5400 to as low as £150.

Plastic money is also becoming exorbitantly expensive, as financial institutions look for new ways to squeeze money out of their clients. According to Which? Research, here are some tactics utilizied:

  • Higher interest rate payments
  • Lower repayment periods
  • High cash withdrawal rates
  • Rising balance transfer fees

Customers are therefore advised to be savvier when using their cards. Try some of these counter-tactics:

  • Use cash for small day-to-day transactions
  • Avoid withdrawing cash from ATMs using the credit card. It is much cheaper to use a debit card.
  • In general, plan your repayments so that you do not incur any penalties. Debt management is a key capability in this tough economic situation.
  • Look out for the best repayment options available. Some options offer longer repayment periods at 0% interest.
  • If a company increases the interest rate on existing debt, you have the right to cancel the card and pay the debt at the previous rate.

Greater Dependence of the British on Credit Cards

Sadly, it has been found that an increasing number of Britons like to use credit cards to fund day-to-day purchases, and more than 20% are not confident about repaying bills in full by the end of the month.

With decreasing income, many households are looking to the plastic fantastic way of making ends meet. This risky approach of low end-of-month repayments not only increases high interest rates, but will contribute to the financial meltdown, even if the IMF prints a bunch more money.


TOPICS:   Debt   Credit Cards


  • -=Mike H.
    Hang on VVince, what about cashback cards such as the eggmoney card? You also fail to mention a credit card allows yout keep money in savings for a longer period. I agree if people are silly with credit cards they are bad, but there are benefits if you are cautious.
  • Gus
    Credit card problem solved: If you don't have the funds to pay your balance in full. Don't use it!
  • Darren W.
    I've been having a strange attack on my bank account at the moment with Lloyds tsb, I get paid on the last friday of each month, I got paid on a friday then come the monday my balance was £10, they claimed I had spent over £5000 in less than 2 days on my debit card... How crazy???? at this point Lloyds TSB could do nothing to help me, there was no fraud activity, no strange transaction etc... 4 days later on the Thursday all my money re-appears in my account without any reason, LLoyds told me that the money had never left.... during the 4 days of being skint they offered me 2 loans, and 1 credit card... I have since been hit 3 times, once last week, LLoyds tsb still refuse to help me and have told me to use my Credit card only for daily purchases... How mad is that for advice!
  • tino
    Hell ...I borrowed, borrowed and borrowed (until they stopped offering me new credit cards). And last month they still upped my credit limits... If I cant pay them any longer, I can just declare bankruptcy.... and the bank will go bust and the tax payers (me and you) will pay for the debt - bail the bank out. And the cycle start all over again. I love this country!
  • MinstrelMan
    Hasn't anyone learnt that the only real way to beat the system is to die in massive debt.
  • blackgerbil1
    i earn 120k a year mo money no probs brah :) , though do spend a lot on da boyz, mummy, eggs n pimped mercs. i am so buff to. get off ya arse n work as a model like me, self luv is gr8. got 2 go know the skool bells ringin for PE :(
  • Lumoruk
    HAHA loving it BG... ...My credit limit hasn't been lowered yet, but then I pay it off each month. Loving my air miles.
  • ladylovesit
    About time too!! We now have an entire generation of people who think it's cool to live on credit. Attitudes need changing ... & fast!
  • tino
    ladylovesit. Why all the hatin toward credit? I am lovin all the credit I get. Now I can buy a nice burberry coat, nicest dell laptops and also got all the bling bling .. my woman lovin it, everyone lovin it. 28% interest is ok as well - better than 120 % i am getting from the payday loan.
  • veedubjai
    Fact of life, everyone should have some basic knowledge of personal finance management especially from day one at school. Has anyone known "Do not spend, what you have not earn". We got into this mess because people are simply dumb enough to spend more than they can earn & now everyone including those who pays their bills on time & in full been penalised for it. My credit limit has not change as I pay my bill on time & in full. There is nothing wrong having credit for emergency purposes but one should take responsibility to their own actions & take into accountability for their mistakes. They are more savers in the country who are been penalised for those who just spend, spend, spend what they can not earn. This is just simply pure GREED. Banks are just as guilty, they should be pro-actively try to recover the money in fairness to limit the clients reliance on credit & interest been brought forward from one month to the next.

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