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Credit Cards -
Now is the time to slash your credit card debts
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Credit card debt in Britain has now reached astronomical proportions with current levels of money owed standing at £225 billion. This is the highest level of card debt in the world apart from in the United States, that has a far larger population and economy.
The most obvious questions are how did this happen?;what can be done to cut back on spending now that the banks are getting tough with the credit crunch starting to take hold?
The reality is banks have been offering cheap credit for years and the UK was able to take great advantage of this because of strong trading relationships with Europe and the US. 0% 18 month deals on cards, 0% borrowing rates for students and plenty of other perks made credit card borrowing so cheap that people were even buying cars on them, rather than take out a huge loan with the dealer. Deals such as these made spending so appealing, and credit cards became not something to be relied on as an emergency fund, but as part of the 21st century lifestyle.
Online shopping only added to the up-take of spending on cards, internet prices are so much more tempting than their high-street cousins and all rely on the flashing of plastic. Chip and Pin has also made the credit card more secure than ever and the increased payment outlets mean that even visiting a cash machine is fast becoming a thing of the past. Train tickets, hotel bookings and even car parking are now reliant on the use of cards. It felt like money on tap, trouble is the reservoir is drying up.
The Northern Rock crisis was the first sign that banks were being crippled through having borrowed cheaply and often to those with poor credit histories. This has meant that getting their money back has become impossible as people default on loan repayments. In desperation, banks had to loan from each other to fund other borrowing such as mortgages, unfortunately we are now at the point where those loans are now drying up as the Central Bank released another £99 billion last week.
Lots of debt is going to hit people hard with rising interest rates and having several credit cards will be the worst debt of the lot. Unless you have a special deal, there is nothing stopping the bank ramping up the monthly interest charge. The first thing to do here is pay off the most expensive debts first and try to find a 0% deal for a bit of breathing space while you pay it off.
The last thing that anyone can afford to do at the moment is add to their existing debt. Credit is becoming harder to get and banks are slashing credit limits on most cards. In the case of Egg cards, it appears that are even willing to withdraw cards in some cases. It looks like the days of sticking everything and a latte on plastic are truly over.
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Credit Card
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