Credit Cards explained...

The amount of people defaulting on their credit cards in the UK has now hit £1 billion. In the last quarter of 2010, the Bank of England claims that banks wrote off more than £1.18 billion worth of credit. There was also an increase of 22% on cancelled mortgage debts. With mortgage debts £163 billion was written off. In the whole of 2010, banks had to write off more than £9.71 billion of unsecured and secured loans. Now charities are warning that homes are facing even more financial pressure due to salary freezes and the increasing cost of living.

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A spokeswoman for the Consumer Credit Counselling Service, Frances Walker, states:

“We are still seeing high level of consumers coming in struggling with their debts, but most people have lower levels of debt. The problem is that, at best, we have households with stagnating incomes and rising costs and at worst households that have suffered from job losses and higher costs”.

There is set to be a change in tax bands and tax credits in April. This is et to further put pressure on families with a low to middle income. Around 5 million people are currently always overdrawn. Most of these included people aged 20-29.

There has been a lot of speculation whether the Bank of England will increase their interest rates later this year. If they do, as it is expected, more people will more than likely struggle to keep on top of their finances.

The head of banking with the site Moneysupermarket.com, Kevin Mountford, claims:

“Times are extremely tough for UK consumers so it’s no surprise to see many Brits living in their overdrafts. The recent rises in the cost of living have made the habit of living in the red even harder to break for many consumers and we can expect to see many more people falling back into this position as living costs continue to increase.”

There were a record number of people going bankrupt in 2010. The figure stood at 135,089 people who went bankrupt and who took individual voluntary arrangement and debt relief.

It is estimated that in 2011, consumers will work 45 days to pay off just the interests on their debt. Unbiased.co.uk carried out research and found that for the first 45 days of 2011, consumers would have earned enough to pay off the interest on their debts. The company declared that February 15th was Debt Freedom Day. The goal is to show consumers how hard they have to work to pay off the interest on their debts.

Karen Barrett, the chief executive of unbiased.co.uk, states:

“Debt Freedom Day is not only to remind consumers of how much their hard earned cash they shell out just to pay off the interest alone, but to highlight the need to take action now and seek advice.”

As more and more people struggle to cope with the rising cost of living, many turn to their credit cards for bad credit to help them out. As 2011 progresses, these figures are only set to get even worse.