Credit card debt is a problem for many people in the UK, with around 4 million people in the country thought to currently be struggling with paying off their credit card debt. The New Economics Foundation has discovered that credit card debt has started to become as unmanageable a process for many people, as it used to be for borrowers of payday loans prior to the FCA tightening up regulations. Should the credit card sector have tight regulations in the same way as payday loans? It has certainly helped to shape a much more transparent and customer focused short-term loan sector.
The interest rates on credit cards are never really as clear as they could be. The average Briton with a credit card will spend £2.50 in fees for every £1 initially spent on the card, and it is this interest that causes the most problems. It is far too easy for the owner of a credit card to just pay back the bare minimum each month once the credit card statement has arrived. If a direct debit has been setup this might just automatically happen. You are paying back your debt, which looks good on your credit file, but realistically you need to be paying off the entire balance, or at least more than the minimum required payment each month if you do not want to spend more than the initial amount spent on fees alone.
The aim is to break the cycle of persistent debt that many people find themselves in when it comes to credit cards.
The first thing that that credit card providers must now explain with greater motivation to customers who have been in debt for longer than 18-months how it is beneficial to pay more than the minimum payment to get out of debt, as well as referring them to debt advice.
If no changes occur over the next 9 months the companies should then restrict spending on the card, as well as offering the chance to transfer the credit to a personal loan with fixed payments at a reasonable rate and period of time. Fees can also be reduced of waived in the most serious cases. These are just simple steps that the payday loan sector had to implement and it has certainly made a big difference to the perception of the industry and the satisfaction levels of consumers on the whole.
A payday loan could be a much better option for you if you are looking for some short-term credit. It is a simple process in which to go through, especially if you find a payday loan company that has a responsible lending ethic and an easy-to-use website. As long as you can afford to pay back the long come next payday and understand the interest fees on top of the loan sum, you’ll be completely fine. Compared to credit cards the payday loan sector has certainly improved customer satisfaction levels.