Warning over credit card debt

Credit cards can be a very useful budgeting tool – but when used for everyday spending, the debt that results is invariably a problem.

This is the view of Annie Shaw, editor of CashQuestions.com, who noted that for some people, having such an account can be very handy, helping to make budgeting and cash flow simpler and more convenient.

She said an example of how a card can be useful is the provision in the 1975 Consumer Credit Act that ensures those ordering items from a firm that goes bust before the goods are delivered can get their money back.

However, people can get into difficulty through using a card "not as a budgeting tool or as a consumer protection tool", Ms Shaw added.

She explained: "It becomes very worrying if people are using it because they actually don't have enough money and they are then not paying off that bill every month. That then becomes a very expensive way to borrow."

Those who do this may soon find they end up with more debt than they can cope with.

In this case, measures such as a debt management plan may help to ease the burden and offer a chance for consumers to bring their debt under control while finding ways to budget batter and therefore avoid piling up more credit card debt in the future.

Earlier this month, the Post Office Consumer Credit Report indicated that 36 per cent of consumers will make everyday purchases with credit cards during January, which may reflect a lack of cash in the wake of the expensive period around Christmas.

By James Francis