About Credit Card

Many Britons are temporarily reducing their immediate interest payments on their outstanding credit debt by transferring high-interest cards to low - or no - interest cards. Almost 29% are seeking the no-interest introductory periods for new purchases, in order to allow them to spend further, at no additional cost.

Financial services provider Abbey shows 51% of credit card holders are switching cards to gain access to an introductory, interest-free balance transfer period. 

Managing Director of Santander Cards, (which provides Abbey’s credit facilities), Roger Lovering, stated, “These figures just show the intense competition in the credit card market. With £11 billion at stake, it’s the credit card with the best deal that wins.”

Competition for the lower rates, and the no-rate introductory period, seems to be driving the credit card industry to reduce their over-all rates. But consumers are cautioned to read the fine print when switching cards; and remain mindful of when the introductory period ends - along with what the rate will be at the end of that period. Many Brits could find themselves locked into a higher rate situation than if they had stayed with their original card company. This is especially true for those individuals who continue to charge on their cards – only to find they have higher fees in the end.

The data from Credit Action shows that the average consumer credit debt at the end of August 2007 was at £4,524 per person - including overdrafts and unsecured loans.

Choosing a secured loan borrowed against property could allow Britons to borrow at a lower rate, than what may be attached to a credit card, while at the same time securing a fixed repayment schedule to eventually clear all their debts.

Some mortgage holders have been using credit cards to meet their monthly repayment requirements. Approximately 7% of men and 6% of women have used a credit card to cover a mortgage payment, according to research conducted by homeless charity, Shelter.

Unfortunately, this practice is almost certain to put borrowers further in debt, as credit card interest rates can be 50% higher than typical mortgage rates.

“Desperation is driving them to short-term, high-cost borrowing. Ordinary people are being forced to seek more risky and expensive ways to stave off the threat of eviction,” said Chief Executive, Adam Sampson.

Credit Action emphasizes these short-term, knee-jerk reactions could prove to be far more costly in the long-term; with the average annual interest costs per person being £3,725, in August 2007.

The UK mortgage market is one of the most innovative in the world. Unlike other countries there is no intervention by the state or state funded entities, and borrowing is funded by either mutual organisations (building societies and credit unions) or proprietary lenders - typically banks. Since 1982, when the market was greatly deregulated, there has been substantial innovation and diversification of strategies employed by lenders to attract borrowers. This has led to a wide range of mortgage products available to borrowers.

Individuals currently in desperation are strongly recommended to seek the financial guidance of a mortgage professional to remedy their financial woes. By obtaining any one of several types of home loans available, some of the equity held in property could be released.

Instead of attempting to tackle financial hardships in a piece-meal way, looking at an individual’s finances as a whole, will allow financial problems to be more easily, and less expensively, managed.