The Co-Operative bank has recently launched its new ‘Think’ Credit Card. Designed to encourage green and ethical purchases, interest on the card drops to 7% if purchases are made in certain stores, such as Lush. After the first purchase on the card, the Co-Operative Bank will purchase and protect half an acre of rainforest.

This, in many ways, is very positive. Ethical consumerism, through organic and Fairtrade products, has the potential to do a lot of good and should be encouraged. But is a credit card that provides additional incentives to spend (however well meaning they are) the right way to go about it?

A big cause of Britain’s debt problems is that credit no longer has a stigma attached to it. Credit cards used to be a source of embarrassment, as they indicated that you were having to borrow and couldn’t afford to purchase items outright. Now they have become something of a status symbol – the danger with this ‘green’ card, and others like it, is that it will further encourage irresponsible borrowing through other means. This new card may be good for the environment, but is potentially bad for debtors.

If this were an ethical debit card or current account, the problem would not arise. It is the encouragement of credit purchases, particularly for ethical reasons, that is the potential source for concern. If the card is used responsibly, as it hopefully will be in the vast majority of cases, then it could be a valuable tool in promoting more eco-conscious purchases. Indeed, it does appear to be offering favourable rate compared to most other cards. But it is the potential shift in attitudes to credit purchases that remains worrying. From a stigma to the norm, and now from the norm to something that is being actively encouraged.

Ethical consumerism has the potential to be a very powerful force, as it brings ethical issues into the day-to-day routines and shopping habits of everyone. But care needs to be taken to channel this force in the right direction – we need to make sure that while we are saving the planet, it won’t cost debtors the earth.

In the aftermath of the credit crunch, it’s been revealed that a number of cards have raised some of the hidden costs of their products, buried in the small print. While the headline interest rates are remaining relatively untouched, a host of hidden charges are creeping in. Most of these increases apply to charges on balance transfers, cash withdrawals, foreign usage and increased purchase rates. There have been over 125 rate hikes in the credit card market over the last two months. They are buried in the terms and conditions, but a can add a huge amount to the final credit card bill.

Anyone who is currently a heavy credit card user, particularly if they are involved in balance transfers or withdraw cash on their credit card, should consult with their bank and check the small print of the terms and conditions to see if anything has changed on their card. Small increases can make a big difference, especially for those whose finances are already on a knife edge – in the run up to Christmas, everyone needs to be careful not to overspend.

Perhaps some better news is that credit card rejections are increasing, with reported rejections going up 17% in the last six months. While this could cause trouble for those already in debt looking for temporary relief, it is a sign of more responsible lending from creditors. Blanket credit card approvals have been the root cause of many an IVA, and this more cautious lending will hopefully lead to fewer people caught in the credit trap in the next few years. But for the time being, in light of the increase in charges, people need to be even more careful about credit card use in the run up to Christmas.

The recent statistics from the Insolvency Service make for interesting reading. Despite reports of growing personal debt (now past the £1.3 trillion mark) and various concerns about the housing market, personal insolvencies have decreased sharply over the last 3 months. The results are even more striking when comparing the most recent quarter with the same time last year. Bankruptcies are still up by 2.2 percent, but IVAs have fallen by an enormous 14.3 percent.

In many ways this was inevitable considering how much the industry has grown over the past few years. The expansion of the IVA industry was never going to continue at the same rate, and it remains to be seen whether this slight downturn will be a temporary slowing of growth or a genuine decline.

Perhaps due to the increased popularity of the IVA as a debt solution, creditors have become a lot more hostile to IVAs in recent months. Northern Rock have become infamous on the forums for their negative voting at creditors’ meetings, with HSBC and HBOS not far behind. The Insolvency Exchange has tried to impose a cap on IP fees and minimum hurdle rates for the IVAs that it is involved in, and many debt management companies such as Debt Matters have taken hits on their share prices and had to scale down their businesses.

The industry is now being more cautious, which is not necessarily a bad thing. A lot of companies (some of dubious quality) jumped on the IVA bandwagon, promoting the IVA as a magic wand that would wipe away debt with little hardship. Reduced profit margins or the need for more expertise in order to succeed as an IP may help to weed out those who have been trying to use the debt industry as a guaranteed moneyspinner while providing mediocre service.

The concern is that the industry is tightening up too much. The IVA is not the solution for every debt problem – bankruptcy, debt management plans and consolidation loans can all be viable options, depending on the circumstances. But there are plenty of people for whom it is the best way out of debt, and they shouldn’t be denied access to a fairly proposed and well managed IVA. Due to the tighter restrictions, debtors in an IVA are having to trim their budgets more and more, leaving very little margin for error. 5 years in an IVA is a long time, and the budget, which is always going to be tight, nevertheless needs to be adaptable to new circumstances. Many people may be choosing debt management or bankruptcy because the conditions for an IVA are becoming unmanageable.

There is a danger that debt problems are simply being driven underground, with people struggling along on debt management plans, paying credit with credit, unable to resolve their debt issues as some solutions are being closed off. It is to be hoped that a sensible compromise can be reached in the near future between debtors, creditors and IPs, to ensure that everyone with debt troubles can use an appropriate solution.