- 13
- Dec
More people appear to be struggling to manage their credit, an industry expert has reported.
According to James Falla, director of Thomas Charles, an increasing number of consumers are unaware of the interest that they are paying on their borrowing, whether this is via credit cards, loans or other means. And with people not taking the time to consider how much they are being charged, it could well be possible that such a lack of thought may see these people develop further problems in managing their money.
He said: “My view on the number of people who have got credit problems is that the number is continually increasing at this present moment in time. We’re certainly not seeing a reduction in the number of people who are looking for help. We’re probably seeing more people who are looking for help now than we were this time last year. That would indicate to me that the number of people who are experiencing problems is increasing.”
In an attempt to supplement their income, Mr Falla suggested those who are already in credit difficulties often resort to taking out another credit card. He went on to claim that such consumers view getting a new plastic card as a licence to spend the money that is held on the card’s limit, without thinking of how they are to pay it back. The director added that many people take out a credit card “pretty much [in] a panic and don’t even think about the interest rate”. By doing so, borrowers could find that they are burdened with an uncompetitive rate of interest which puts further strain on their spending, with a cheap personal loan potentially being a more cost-effective solution to money management difficulties.
He claimed that “in reality, most people don’t actually know what rates they’re paying”. Indeed, the Thomas Charles director claimed that if credit cardholders were asked if there was a reason as to why they had chosen a particular card or if they knew what the rate of interest is, the majority of people would say “no, I wasn’t aware of it. It was just the card that I was offered”.
As a result, Mr Falla stated that card providers should do more to make borrowers aware of how much interest they would have to pay back. He pointed towards the unsecured loan business as a good example of how this is done, as many loan providers show consumers what they will have to pay back over a certain period of time. Consequently, people wanting to keep track of their spending may wish to consider taking out a cheap loan ahead of borrowing money from a plastic card.
With pressures on finances almost certainly due to increase over the coming weeks due to the Christmas and new year period, those looking for an effective means of money management may wish to consider taking out a low-rate personal loan. Speaking last month, Esther James, personal finance analyst for Moneyfacts, reported that people wanting a low-rate loan should act as soon as possible. She stated that although a number of loan lenders have withdrawn some of their products in recent weeks, prospective applicants should still be able to find a “handful of competitive deals”.
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