People being no more cautious with credit cards, say experts

Despite the financial pressure the recession has placed on consumers, they still have not become any more cautious about using credit, one expert has said.

According to Credit Action, a national money education charity established in 1994 to help people manage their money better by offering financial advice and training, there is no evidence people have become any more cautious about spending more money than they can afford.

The charity made the comments after the release of figures from the Bank of England which revealed that interest rates on credit cards had risen from 15.89 per cent on November 30th last year to 16.26 per cent the next following month.

Chris Tapp, director of Credit Action, said that the increase was relatively small.

He explained: "The rate rise between November and December is relatively small in real terms. However, for some people it can be quite a small change that ends up pushing them over the edge. So it is not good news, although we certainly shouldn't over exaggerate the impact that it is likely to have."

Mr Tapp went on to say that Britain was still enjoying "a love affair with the credit card".

He said: "We are still an economy that is reliant on credit and we are still a society that loves to use credit. While we as a charity think it would be a good thing if we were much less reliant than we are, I'm not overly confident that is what most people on the high streets seem to think."

According to statistics published in January 2010 by Credit Action, total UK personal debt at the end of November 2009 stood at £1,459 billion, which was a growth of 0.7 per cent compared with the previous 12-month period.

The organisation found that total lending, including borrowing on credit cards, in November 2009 rose by £1.1 billion, while secured lending increased by £1.5 billion and total consumer credit lending to individuals at the end of November 2009 was £227 billion.

However, Mr Tapp said the rise in lending was "relatively small" in real terms, but was still worrying as an overall indicator.

He also noted that in tight financial times the smallest of changes can push a credit card holder's budget over the edge, meaning that extra care needs to be taken.

"It wouldn't be a surprise to see credit card balances go up a little bit in the coming months," he concluded.