Consumers with high interest rate credit cards may need debt management advice
17 January 2010 By MoneyHighStreet Staff Leave a Comment
Consumers with high interest rate credit cards may need debt management advice to avoid being trapped in debt as some credit card providers continue to increase their rates.
Debt management adviser Credit Action said among the option available to consumers is the individual voluntary arrangements or IVAs to help them from the spiralling interest rates.
The group made the suggestion after the Bank of England revealed that the average interest rates on credit cards rose from 15.89 percent to 16.26 percent after Christmas. The increase could further push borrowers into more debt problems, the Bank said.
Credit Action director Chris Tapp said, “We are still an economy that is reliant on credit and we are still a society that loves to use credit.”
Pushing consumers into more debt would make it difficult for them to get out. Resorting to an IVA could be the best solution for these consumers.
IVAs freeze the interest rates on credit cards. People who owe money to a number of different lenders will only have to contend with one monthly repayment at a frozen interest rate, which could take some of the pressure off.
Tapp issued the advice as state-owned banks, such as NatWest and the Royal Bank of Scotland increased their purchased and balance-transfer rates for new and existing customers on their Classic cards from 16.9 percent to 19.9 percent.
By contrast, private providers are offering better deals to lure new customers.
Non state-owned providers like Barclaycard, Egg and the AA have extended their introductory zero percent balance-transfer periods for new customers, while MBNA launched a card charging 5.9 percent a year for life on balance transfers, making it one of the cheapest available, though it does have a two percent transfer fee.
Tapp said that despite the rise in interest rates, people would still continue to borrow using their credit cards. He advised consumers to make headway into debt by using an IVA.
The latest Credit Action report found the average UK adult owes £30,226 when mortgages are included.
