Brits tackling credit card debt whilst they can
Brits seem to working on the premise that they are on borrowed time in terms of their ability to pay off their debts and with this in mind many are seizing the opportunity to put any spare cash towards repayments of their credit card debts. Recent figures have shown that consumers have been spending less on their credit cards in addition to paying off more money on their credit cards debt.
The figures come from the British Bankers Association and have shown that shoppers spent £6.8 billion on their credit cards in September. This was a drop from the £6.9 billion that was spent in August on credit cards. Consumers have also paid off more than they have spent on their credit cards in that period, paying off £7.2 billion of their debt, which is significantly more than they spent on their cards.
There are many reasons why consumers are now thought to be putting more effort into paying off their credit card debt. An uncertain economic climate, financial worries, concerns over the base rate and mortgage repayments rising, and worries over job losses are all thought to be contributing towards the attitude of consumers when it comes to repaying their credit card debts. Many may be trying to pay off as much as they can before the base rate increases, so that they are better able to handle any increases in their mortgage repayments stemming from the base rate increase.
One BBA official said: “Households are limiting their borrowing in the face of unemployment concerns and pressure on household finances amid general economic uncertainty.”
Are you ditching your store card?
Over the past few years, store cards have become popular amongst many shoppers, who are enticed into taking these cards when making purchases, as they are often offered an instant discount. Once they have the cards, many consumers continue using them over the course of the year, but those who spread the repayments on their balance face crippling rates of interest that are far higher than competitive credit card rates.
Figures have indicated that a rising number of people are getting wise to the huge rates of interest that they are paying on their store card balance, resulting in a big drop in store card use over the past twelve months. The figures were released by the Finance and Leasing Association and have shown that many forms of consumers spending fell in the twelve months to August this year, but the biggest fall was with store cards.
In the twelve months to August credit card spending fell by 2 percent, second mortgages fell by 10 percent and spreading repayments via credit from retailers fell by 8 percent. Car finance, however, is said to have increased by 1 percent. With many people having to tighten their belts financially many have decided that they cannot afford the high interest rates that store cards are charging, hence the huge drop over the past year.
Whilst there has been a significant drop in store card use, things may start to pick up again over the festive season as cash strapped consumers looking at different forms of finance to fund their Christmas spending. This is the time of year that many retailers push their store cards, which could see the number of cards being take out and used spike over the final quarter of the year.
The good and the bad with student credit cards
Finances can be very tight for students, as anyone who has ever had to cope on a student budget will know. This is why many students decide to turn to credit cards, so that they have some form of financial backup and have a flexible and convenient means of making payment for purchases. There are many benefits to students getting a credit card whilst they are still young and at university but there are also some risks attached for students who fail to prioritize when it comes to making repayments on their credit cards.
By getting a credit card whilst still at university, students are able to take the very important step of building up their credit, which is vital for those that want to be able to get access to competitive finance such as car finance, mortgages and loans when they leave university and step out into the big wide world. It also enables them to build a relationship with a bank or financial institution ready for when they start working after university and will require banking and financial services.
However, officials have pointed out that there is also another side to students having a credit card. With a credit card at their disposal many students who are inexperienced with financial management could quickly find themselves getting into an unmanageable level of debt, which they will then struggle to repay. Many students may also find that they struggle to make payments on time, which could negatively impact their credit for the future.
One industry official said: “Credit cards can come in very useful for students and when used and repaid properly they can help students to enjoy a better financial future. However, failure to use and repay these cards properly could lead to students struggling to get affordable finance in the future, which could mean problems when getting anything from another credit card to a car or mortgage.”
Start looking for a suitable credit card now
Consumers who are planning to use a credit card to fund their Christmas purchases but who have yet to apply for and get a credit card are being urged to start their search for the right card sooner rather than later given that we are already well into October. At this time of year processing times by credit card firms can become much longer due to the high number of applications received from the many people looking to use credit cards over the Christmas period.
Officials have warned that the situation will be even worse for those hoping to go for the most competitive deals, as most people will be going for the same cards and providers in order to try and bag the best deal possible on their credit cards. This includes credit cards that offer generous periods of interest free credit, which many people opt for so that they can spread the cost of Christmas without being charged any interest.
For those that know that they will be using a credit card for their Christmas and New Year purchases it is important to start the search for the right finance right away, particularly if there is any chance of being turned down and having to then look for alternative means of paying for purchases. The higher level of applications at this time year means that credit card companies could be far slower when it comes to completing the application process and sending out cards.
One official said: “Once October hits the need to start your search for a credit card in time for Christmas becomes urgent, as otherwise you could find yourself in a position where you will not receive your card in time even if you are accepted. If there are any particularly good deals on from various providers you will find that they will be swamped with applications from many people who are all in the same position, which means that you may face even longer delays with processing.”
Benefit from interest free cards this Christmas
As is often the case at this time of year, the frenzied search for credit cards in time for Christmas is set to begin. Many people in the current climate will be relying on credit cards in order to fund their purchases for Christmas and as such will be looking for the best deals on suitable cards so that they do not end up paying for the privilege of being able to use a card.
For many people the most suitable credit card will be the interest free purchase credit card, and there are a number of these cards available from a variety of providers although you will generally need to have decent credit in order to get one. With these cards consumers will be able to pay for their Christmas gifts and purchases whilst avoiding having to pay out any interest for the privilege of spreading their repayments
It is worth noting a couple of things when it comes to getting an interest free purchase credit card for Christmas. Firstly, the period of interest free credit can vary widely from one provider to another so you need to make sure that you compare different deals in order to get the most suitable 0 percent period. A second thing to note is that the closer it gets to Christmas the more difficulty you will have in terms of getting your credit card quickly, as many people apply at this time of year and therefore providers have far more applications to get through, which can mean longer processing times. However, for those able to find a suitable interest free credit card in plenty of time there can be some great benefits.
One official stated: “Interest free purchase credit cards are a great way for shoppers to spread the cost of Christmas without paying any interest. However, it is important to repay the debt by or before the interest free expiry date so that you don’t find yourself suddenly being hit with loads of interest.”