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Big rise in credit card use predicted

Big rise in credit card use predicted

Category: Credit cards

Updated: 04/01/2012
First Published: 04/01/2012

MONEYFACTS ARCHIVE
This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

Over 12 million people will spend this January relying on their credit cards to fund day-to-day costs, worrying new figures show.

The first month of a new year is notoriously difficult to financially navigate after an expensive festive period.

And research from the Post Office shows that more than one in three (36%) credit card holders in the UK will turn to their plastic to see them through the month.

It represents a 2% increase from January 2011, with figures also showing that 42% of credit card customers expect to use their cards for grocery shopping this month.

Another 7% said they will turn to their credit cards to pay their domestic bills this month.

Consumers expect to be more reliant on their credit cards in January 2012 than last year, with over two million (7%) people planning to put more on plastic this month compared with January 2011.

Almost four in ten (38%) say they plan to increase their spending by up to £200.

Those who are forced to turn to their credit cards this month should consider looking at deals which offer 0% on spending, says Post Office head of credit cards Az Alibhai.

"With many people expecting to use their credit card more in January, we urge cardholders to check out their interest charges and consider switching to a deal with a zero per cent offer on purchases and balance transfers.

"People with debts spread across different cards may benefit from consolidating their debts on to one card to make them easier to manage and to further reduce the amount of interest being paid."

There are a number of cracking credit cards currently on the market, with deals such as 0% on spending and balance transfers up for grabs.

Credit unions will soon be able to offer their services to more people as a result of a shake-up of existing rules.

The new powers are the result of legal changes which will give credit unions more flexibility to choose who can access their services.

From 8 January 2012, credit unions will be able to extend membership to more than one group of people, no matter where they live or work.

And for the first time, credit unions will be able to pay interest on deposits, instead of a dividend, while businesses and community organisations will be able to join a credit union and use the services it provides.

Credit unions provide a range of financial services such as affordable credit, current accounts, savings accounts and prepaid cards.

The Association of British Credit Unions Limited (ABCUL) says that the change will help individuals, businesses and other organisations access fair and affordable financial services in their communities and allow credit unions to provide a more effective alternative to high street banks on the one hand and high cost lenders and loan sharks on the other.

Up until now, credit unions have been hampered by outdated restrictions which meant all of their members had to have something in common (such as living in the same geographical area or working for the same employer); only individuals were able to become members, not organisations themselves; and credit unions could not pay interest on savings, only a retrospective dividend.

Credit unions no longer need to prove that all the eligible members have something in common, which will mean that credit union services can be extended to new groups much more easily.

"These changes are a major breakthrough in the delivery of credit union services to communities around Britain ," said Mark Lyonette, chief executive of ABCUL.

"The new rules mean credit unions can now compete more effectively with banks and other lenders to provide fair and affordable financial services.

"Credit unions will be able to reach many more people, helping them to develop a savings habit, which can only be good for communities."

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Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.

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