British Consumers Need to Handle Debt More Effectively

by : Danielle Fletcher

Credit cards can be a good way of handling your finances if used sensibly. Credit cards often attracted customers with 0% interest deals on balance transfers and or new purchases. These deals can be really good, but you need to be savvy to maximise the benefit.

If you take out a credit card deal with a 0% deal on new purchases make sure that when the deal ends the balance is clear. This will ensure that you don't get charged interest which can be back dated across the length of the deal. The same is important with balance transfer offers as you could end up paying more for the privilege if you factor in transfer fees. However whilst this all seems like common sense there are a surprising number of people who do let the deals lapse and end up on higher interest rates than they had on their previous cards. There are many reasons why this could be; including forgetfulness or inability to pay off the debt at the end of the interest free term. But this is symptomatic of the ways people in Britain are now managing
their finances.

The majority of adults living in the UK have a credit card if not two or three. However a recent report found that nearly half of credit card owners do not know the amount of interest that they are being charged. This could be one of the contributing factors to the increase in the amount of personal debt over the last ten years. When the British economy was doing well, people felt comfortable getting into debt in order to afford the lifestyle that they wanted. Now that the economy is struggling handling the debt has become more of an issue.? Whilst most people know the rate of interest they are paying on their mortgages, knowing the interest rate on your credit card seems to be less of a priority. But knowing the rate of interest on your credit card is important in order to manage the debt effectively.? Paying high interest rates on credit, when you could switch to a 0% deal seems ludicrous.

Perhaps the reason why British consumers seem to be so bad with their credit cards is that many see them as an extension to their bank accounts. They can use them to spend money that they do not have and then pay it off when they next get paid. Often though, people will only pay back the minimum amount each month via a standing order or direct debit. This means that they do not need to contact the credit card company to make payments and makes it easier to distance yourself from the bill being racked up.? But if the debt gets too much, that is when it becomes very difficult to manage the problem and alternative measures may need to be taken.? It is expected that IVAs and bankruptcies will increase over the coming years due to Britain's inability to handle their debt effectively. Making sure you handle your credit cards effectively will help avoid that.