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