3 Million Britons Own Five Or More Credit Cards
Over 3.2 million Britons are juggling money between five or more credit cards, a recent report has shown, a figure that spells trouble for many attempting to avoid debt in the uncertain year ahead.
Owning multiple credit cards doesn’t necessarily cause disaster. Savvy use of 0% on purchases or balance transfers that is available on particular cards can cut debt and help people manage their money better. But it is when money is spread across all the cards, and minimum repayments are being paid entirely with money taken off the other credit cards, that debt can rapidly become uncontrollable.
Credit cards are one of most common causes for serious debt and insolvency – easy to get, low minimum repayments and high rates of interest make them both attractive and dangerous for those with money troubles. The ratio of minimum repayments to interest is such that people are often only just paying off the interest on their cards, and are nowhere near to paying off the principal debt. Unsurprisingly, the majority of those who enter into an IVA have numerous cards active before they enter the arrangement.
Banks are starting to take action to curb credit card addicts (though perhaps prompted more by a fear of bad debt than out of concern for debtors.) Barclaycard is now rejecting over half of its new applicants. Egg has recently written to161,000 of its ‘risky’ customers, warning that their cards will be frozen in 35 days – though the fact that they have 161,000 ‘problem’ customers is itself gravely concerning.
These individual actions by banks are positive, but means nothing unless they are implemented by every creditor. With so many credit cards available, tightening restrictions on one or two is not good enough. Credit cards need to be more responsibly managed across the board, with greater communication between creditors to prevent debtors from obtaining too many creditors, and better education about the real cost of credit cards in the long term. Otherwise, credit cards will continue to trap debtor after debtor in an uncontrollable debt spiral.
