Payday debt and credit card debt

When it comes to payday debt and credit card debt, the numbers are interesting. After all the hullabaloo about Payday lenders and their terrible influence on the British population, luring people in and ensnaring them in a web of debt and deceit, there is a credit provider that is flying smugly under the radar enjoying a misguided reputation.

Britain boasts the largest credit card industry in the whole of Europe. The sector is worth 150 billion pounds a year. 30 million UK citizens own a credit card and the total national credit card debt sits at 60 billion pounds. The StepChange debt charity says that over 500 thousand people approach them a year with credit card debt. According to the charity, the average person has just under 10 thousand pounds in credit card debt and some 10 percent own five or more credit cards.

Mike O’Connor, chief executive of StepChange charity says

“Too many people are using credit as a safety net when all too often it is a trap which leads to problem debt. Credit card debt is one of the most common debt problems we see. Many people are struggling with multiple debts, high balances, and interest rates.”

The FCA (Financial Conduct Authority) is to launch an investigation this year into the credit card market. The focus of the investigation will revolve around how complex the terms and conditions of credit cards are, how fair and transparent the terms are, and if or how clients can switch between credit providers. The FCA will also be examining how these companies go about marketing their cards and the packages that come with them. Emphasis will be put on whether the credit card works in the best interest of the client. According to research, there is a trend for credit card providers to “wear down” potential customers by constant marketing tactics which include approving people for cards who have not even applied for them.

Richard Koch, who is Head of Policy at the UK Cards Association said

“The industry has a longstanding commitment to responsible lending and transparency and over the last five years has introduced many changes including on credit limits and re-pricing of debt, improved transparency, and forbearance for those who find themselves missing repayments.”

Credit cards are a somewhat older institution than Payday loans, however, if you examine the extremely fine print at the bottom of the page (which statistics say only 1 percent actually read) it becomes apparent that credit cards are not a far cry from short term high interest loans. Credit card interest rates are not to be trifled with.