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Britons Start 2011 With £2.05 Billion In Credit Card Debt

by Jim ONeil on December 31, 2010

in Personal Finance News

The Sunday Telegraph announced that shoppers in Britain will owe £150 million on their credit cards by February. Surprisingly, this figure is due to spending on sales being offered this week, not their pre-Christmas spending, for which they already charged £1.9 billion on their cards. This comes on the heels of figures suggesting record levels of insolvency.

Experts believe that part of this debt is due to attempts to get ahead of the VAT increase, which takes effect on January 4. The Consumer Credit Counseling Service in the country stated that most Britons will have difficulty with 2011 budgeting. This is due to a predicted one million additional redundancies and rising prices.

Kelkoo, a consumer Web site, recently published research showing that one in three British shoppers are purchasing items earlier than they planned so they can avoid the higher VAT rate. However, many of them are making the purchases using a store charge card or other credit card. The interest rates on these wipe out the VAT savings unless the balances are paid in full.

The UK Payments Administration reports that 12 percent of Britons with credit cards only pay the minimum amount due each month. A CCCS spokeswoman said that people who think that paying the minimum credit card balance each month means they are properly managing their finances are in a “fool’s paradise.” The latest figures from the Bank of England indicate that over half the population is in debt.

The average credit card interest rate is a bit higher than 18 percent. The Bank of England reports that British consumers have £58 billion in credit card debt and £157 billion in overdrafts and unsecured loans. Even retailers are feeling the pinch as higher prices and less disposable income may result in a £2.2 billion decrease in first quarter 2011 retail sales.

True American

Seems like you're bashing capitalism here – would you use the government to rein in private companies like credit cards and BP?

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