Bev Budsworth MD of The Debt Advisor Ltd based in Old Trafford in Manchester was chatting to Mike Sweeney BBC Radio Manchester this morning about how to avoid getting into trouble with credit cards.
The discussion follows the 50 year anniversary of Barclaycard first introducing their first credit card in the UK in 1966.
Barclaycard sent out 1.25 million credit cards to some of its customers in June 1966. Although many people returned the cards or did not use them, many embraced this new form of credit. It was considered a revolution by woman who had traditionally needed a male guarantor to obtain credit.
50 years on and consumers are now accustomed to spending on plastic, but credit card spending was new and almost unheard of in the late 1960s.
Back then, the terms were quite modest with 1.5% interest being charged, and a maximum credit limit of £100 (£1,680 in today’s money). By comparison, the average credit card limit today is £4,000.
Since then, the use of credit cards has skyrocketed with 56 million credit cards being issued in the UK last year. By 2021, it is expected that payments from credit and debit cards will exceed that of cash.
Recent statistics show that the average household has £2,387 worth of credit card debt. If you were to make minimum payments at 2% on this card, it will take 58 years to clear, with interest payments totalling £9,565 and the total repaid a staggering £11,952.
Bev Budsworth, managing director of The Debt Advisor says “With the reward and cash back schemes that credit cards now offer, credit cards are an excellent financial tool for consumers. A credit card can effectively be free cash if you clear the amount you borrow within the interest free period which can be from 22 to 55 days depending on your terms. Also credit cards offer protection if you are sold goods of inferior standard or if the goods do not materialise because the supplier goes bust or fails to deliver”.
Bev adds, “However, it is very easy to get into difficulty with credit cards and they can be a very slippery slope to financial decline. Credit card companies now must encourage customers to pay more than minimum payments. It is savvy to work out a budget so you know how much you can safely spend each month. It’s also important to avoid carrying over a balance and never to use your card to supplement your income.”
If you do end up with serious levels of credit card and other debt, there are options which can freeze interest and charges and allow you to repay an affordable sum each month. An Individual Voluntary Arrangement (IVA) if successful will allow you to write off the amount of debt remaining at the end of the IVA. These solutions will affect your credit rating and do have disadvantages which need to be seriously considered.
If you are struggling, please give our team a call on 0800 0851 825 or use our contact form. Our advisors can speak with you about all available debt solutions such as Debt Management, IVAs, Bankruptcy and Debt Consolidation.
All debt solutions need to be carefully considered. IVA’s are formal solutions and failure to keep to the terms can result in your IVA failing and you could end up bankrupt.
There is also free debt help and advice available through a variety of debt charities. For more information, we recommend you visit www.moneyadviceservice.org.uk.
The Debt Advisor is authorised and regulated by The Financial Conduct Authority (reg no: 606669). We are also a member of the Debt Resolution Forum and we adhere to their codes and standards.