Customers Vs Christmas Credit Challenge
There's no getting away from it, Christmas is fast approaching. With shops already decorating their window displays with festive decorations and TV ads enticing us with gift ideas and deals, it's hard not to succumb to the lure of Christmas spending.
Each year the echo of last year's shopping spree aftermath resonates those same old words of remorse; "next year we won't spend as much". However, the sad reality is that never seems to happen and despite our continued belief that all extra credit card bills will be paid off by the end of February, the debt actually looms for an average of 6 months or more gaining interest along the way.
This week the accountancy firm PriceWaterhouseCooper released their Precious Plastic 2008 report which revealed that many lenders have now raised their guard by tightening their lending policies as a result of an increase in borrowers defaulting on their loan repayments.
Despite a reduction in credit card borrowing this past year, predictions now show an estimated upward trend in credit card dependency in an attempt to make ends meet and make those all-important repayment deadlines. As fixed-rate mortgage deals come to an end for many homeowners in the coming year it will be interesting to see if a surge in credit card borrowing actually takes place, as foreseen by the financial group.
Richard Thompson, partner at PricewaterhouseCoopers said, "There are tough times ahead for both consumers and credit card companies and banks are continuing to take action in response to the rise in consumer debt."
Further warnings mention credit card companies introducing annual fees on their credit cards in an attempt to recuperate lost revenue through defaults.
So what does all this mean for the consumer? Well, with stricter lending criteria many will find obtaining that extra credit they need for Christmas increasingly difficult and those that manage to be accepted will no doubt be faced with higher charges and interest rates. In the New Year not only will consumers be faced with a credit card bill but those on fixed-rate mortgages will have to find extra cash to make increased mortgage repayments after the fixed-rate period is over. The end result will surely be reflected in their credit card balance only adding further to any outstanding debt already accumulated.
The report showed an average of £33,000 debt for UK adults including mortgages and credit cards, a figure which has almost doubled from the average of £17,000 back in the year 2000.
Published on November 28, 2007
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