Payday debt and credit card debt

The numbers are interesting regarding payday debt and credit card debt in the United Kingdom. With all the scrutiny that the payday lending sector has been receiving amid accusations of luring the British public into debt, it seems there is a credit provider flying under the radar; credit card providers.

Britain has Europe’s largest credit card industry and it is worth a whopping 150 billion pounds each year! This is no small amount. As many as 30 million citizens in the United Kingdom are the proud owners of a credit card. The grand total of national credit card debt is an enormous 60 billion pounds. According to the StepChange Debt charity, more than 500 000 people ask them for help each year. Help, that is, with their credit card debt. StepChange states that the average UK citizen is indebted to the amount of 10 000 pounds in credit card debt. StepChange also says that 10 percent of credit card holders own five or more credit cards.

StepChange believes that there are too many people relying on credit cards as their safety net. The charity believes that relying on credit cards is a trap leading to problems with debt. Credit card debt is one of the most common forms of debt that StepChange encounters. They say that many people are having a struggle with multiple debts.

The credit card market is to face an investigation by the Financial Conduct Authority (FCA). The investigation will focus on how complicated the terms and conditions of credit cards are as well as how transparent and fair the terms are. They will also investigate if or how a client is able to switch between providers of credit cards. Credit card marketing practices will also come under investigation and under scrutiny will be the packages that come with the cards. The client’s best interest will be investigated because there is currently a trend for providers to “wear down” any potential client with shady marketing. One marketing ploy is to approve people for credit cards when they have not applied for the credit cards.

According to Richard Koch, Head of Policy at the UK Cards Association” “The industry has a longstanding commitment to responsible lending and transparency” Mr Koch added that many changes had been introduced over the past five years and these changes included credit limits and the re-pricing of debt. He also states that there has been improved transparency and tolerance for clients who miss repayments.

Some in the Payday Loans industry still has a way to go to clean up the way they do business and so does the credit card industry. In reality, credit cards are not far from being the short-term high-interest loans that the payday lenders are accused of.