Credit card debt ‘can easily get out of control’

Credit cards have their uses but spending on them can easily lead to severe debt, an expert has warned.

Spokesman for Candidmoney.com Justin Modray noted that using a card can have advantages for those able to pay back anything owed in full each month, while items worth over £100 bought on plastic are covered under the 1974 Consumer Credit Act if anything goes wrong with them.

However, he added: "Credit cards can become a prohibitively expensive way to shop and risk sending you into a descending spiral of debt."

Mr Modray added: "If you're tempted to use a credit card to splash out on more than you can afford, think twice. Better to save up for something than rack up expensive debts that could end up strangling your finances."

Some consumers may fully agree with this advice, but do so retrospectively having learned the hard way what the consequences of spending too much on plastic can be.

For some, severe debt over £15,000 may be so hard to tackle that an individual voluntary arrangement (IVA) could be considered.

An IVA involves the freezing of debt and the reduction of monthly payments, to be made over a period of five years or less, at the end of which all remaining debt will be paid.

This will damage a credit rating, but those taking them out are likely to suffer this anyway because of their inability to pay what they owe by conventional means.

For many consumers, reducing credit card balances has been a priority in recent months, new statistics have indicated.

The British Bankers Association figures for July showed more was paid back on cards than spent last month – £7.1 billion compared to £7 billion – a persistent trend since the credit crunch.

Posted by Paul Thacker