Despite all the apparent lessons to be learned from the credit crunch through high levels of consumer overspending and borrowing, one expert has said …
Despite all the apparent lessons to be learned from the credit crunch through high levels of consumer overspending and borrowing, one expert has said one mistake continues to be made consistently.
Those who take on credit card debt are doing so not as a means of helping with cash flow and then paying it off at no or low interest, but are still thinking of how much they can splurge on purchases, according to Justin Modray of personal finance website candidmoney.co.uk.
He said: “I worry there’s still a culture of chasing cards with high credit limits rather than a decent rate of interest.”
This priority, of course, may appeal to those wanting to borrow plenty of money – but the danger may stem from consumers taking on debt levels far higher than is necessary, which may be avoided by means such as having a loan with a much lower interest rate and regular repayments.
Mr Modray noted those who do want a card should be able to find information on good rates to keep down their debt levels, but warned price comparison websites “may give most prominence to the providers that pay them the highest commissions”.
The comments come after flaws in the ways consumers use plastic were revealed in research last week by moneysupermarket.com.
It showed 46 per cent of people do not pay off the balance on their card each month, with the result that £2.3 billion of interest is added to what people owe each year.
The study also showed one-in-five are worried about their current level of credit card debt.
By Joe White