Credit Card Debt
At the end of 2008, a study by uSwitch found that there were 73.1 million credit cards in the UK which is more than the entire population of approximately 60 million.
When you consider that many of the 60 million aren’t eligible for a credit card due to their age, then it’s obvious there is a problem with
credit cards being relied on too much in the UK.
As at July 2009, the level of outstanding credit card debt in the UK stood at a staggering £53.9 billion.
So what are the main things to consider when looking at your level of credit card debt?
Borrowing from one company to pay another
If you owe money to one company and can’t afford to repay it on time, then it’s tempting to borrow the money from another by using your credit card so that you don’t get any charges on your account.
The problem with this approach is that all you’re doing is paying off one debt and getting further into debt by doing it, as you’ll have to pay interest on the amount you’ve put on your credit card.
If you find yourself in this situation, you should seek debt advice as soon as possible so that you don’t get into a vicious circle of debt.
Consolidating your credit card debt
Having more than one credit card debt could mean you’re paying different levels of interest on each one.
If you have a credit card or store card debt with a very high interest rate, you can save yourself a lot of money by consolidating all your borrowings onto the credit card with the lowest interest rate.
This should only ever be viewed as a short term fix as all the money you’ve borrowed will have to be paid back eventually, and most credit card companies are now charging fees for balance transfers, which increases your level of debt further.
Applying for lots of credit cards
If your current credit card is maxed out and you don’t have enough cash every month to pay all your bills, the worst thing you can do is apply for another one with a different lender.
Having multiple cards will only increase the temptation to rely on credit card borrowing to get by each week or month and soon you’ll be faced with an impossible level of debt to pay back.
If you apply for a lot of credit cards in a short space of time, this will affect your credit rating too as it gives the impression your finances are not in good shape.
Cutting up your cards
Cutting up your credit cards is a good way of ensuring you don’t use them again. You will of course still have to pay back the amount of debt you’ve accrued, but by not having them on hand, it forces you to tackle your financial problems head on and work towards a long term solution.
Summary
In 2008 over 3.3 million applications for new credit cards were refused by lenders which shows that people are still looking to borrowing as a solution to their financial difficulties rather than facing up to them by getting professional debt advice.
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