Malcolm Murphy asked:
This week has seen the announcement that the UK Government is proposing a number of changes to the way in which credit card providers can operate. The aim of the initiative is to stop providers of credit cards being able to take advantage of customers who cannot clear the balances on their cards. It is estimated that the British credit card industry has an annual worth of approximately £53billion.
As credit cards were never designed to carry a balance in the longer term they can be amongst the most expensive ways to borrow money.
Some of the tactics used in recent years by the credit card industry have helped Britain earn its reputation as the “debt capital of Europe”. That said, the last 12 months has seen an overall reduction in credit card debt from £66billion to £64billion as people have changed their spending habits in light of the current economic climate.
The proposed measures include:
Higher Minimum Payment
This is aimed at addressing the fact that, most minimum payments at present are in the region of 2% and make little impact on the balance as the majority of the payment is used to pay of the interest.
Outlawing automatic increases to credit limits
This will hopefully stop the practice of routinely increasing the available credit to the customer without their prior consent.
Annual Statement of Interest
This measure is intended to ensure that every customer is aware of just how much the debt carried as a balance on a credit card is costing them.
The big question is do the proposed changes go far enough? I do have my doubts. However, it is a good start and should be applauded. Only time will tell if these proposals will become reality.
Alan
This week has seen the announcement that the UK Government is proposing a number of changes to the way in which credit card providers can operate. The aim of the initiative is to stop providers of credit cards being able to take advantage of customers who cannot clear the balances on their cards. It is estimated that the British credit card industry has an annual worth of approximately £53billion.
As credit cards were never designed to carry a balance in the longer term they can be amongst the most expensive ways to borrow money.
Some of the tactics used in recent years by the credit card industry have helped Britain earn its reputation as the “debt capital of Europe”. That said, the last 12 months has seen an overall reduction in credit card debt from £66billion to £64billion as people have changed their spending habits in light of the current economic climate.
The proposed measures include:
Higher Minimum Payment
This is aimed at addressing the fact that, most minimum payments at present are in the region of 2% and make little impact on the balance as the majority of the payment is used to pay of the interest.
Outlawing automatic increases to credit limits
This will hopefully stop the practice of routinely increasing the available credit to the customer without their prior consent.
Annual Statement of Interest
This measure is intended to ensure that every customer is aware of just how much the debt carried as a balance on a credit card is costing them.
The big question is do the proposed changes go far enough? I do have my doubts. However, it is a good start and should be applauded. Only time will tell if these proposals will become reality.
Alan
