The Levels Of Credit Card Debts Have Risen To Record Highs

Credit card debt has risen to record highs in recent times

. Many accountancy firms and financial watchdogs have predicted a dramatic increase in the level of personal credit debt that is owed by each person in the country. More people than ever now owe significant amounts of money, maybe even as higher amounts than their annual income.

The problem with credit card debt is that it is never an amount that we can claim to know with certainty. Most of us would be very surprised if someone sat us down and told us the exact amount of money we owe on all our credit cards.

The reasons for this are many. For most of us, handing over cold, hard cash is very different from paying with a card. For some reason, when paying by card we are much happier to spend huge amounts of cash without blinking an eye. Supermarket spend comes to hundreds of pounds? No problem, here's my card. But what if we had to actually give someone a hundred pounds? Hurts a bit more right?

A large element of this will be the forgotten or absent minded spend. It is very easy to put everything onto the plastic and still be left with cash in your pocket, for example. It is very misleading and leads you to think that you have spent a lot less than you think. Then also, are the subtle techniques that supermarkets and department stores use to fool us into thinking that 1) we are getting a real bargain, therefore our spending is justified and 2) that we are not spending as much as we think by pricing things with a few pennies less.

Finally, the credit card debt increases month by month. The interest can vary widely, but is a significant proportion of the amount. So if someone is only paying off the minimum amount every month, then they will actually only be repaying a tiny amount of their total debt. This can be misleading because even if you are paying hundreds of pounds back, the amount taken off the balance may only be a fraction of this.

Then also, credit card debts do not just remain static, they increase each month because of the interest. Even a low interest rate can generate large increases over time. If the minimum amount is being paid off each month then this can amount to just a tiny fraction of the debt overall being repaid.Banks are cutting down on the amount of lending they are prepared to do. This past financial period has seen an 8% drop in the number of credit cards issued. This has translated to a roughly 3% drop in borrowing over the same fiscal period.

But because unemployment has also risen, this means that many people than before may be forced to use credit cards not for luxuries, but for the necessities. It may be their only way to feed and clothe their families. For some it may be too late. They may have already accumulated a debt at or near their credit limit.

The highest ever recorded levels of credit card debt are now a fact of our lives. We have been almost forced to take on these cards by lenders in the good times because of attractive deals and 0% balance transfers, but we must also take on our own share of the responsibility for these debts.

by: George S Mimis

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