People becoming more intelligent at managing debt

A study by Santander Cards has shown that people are becoming more
intelligent in terms of debt management. The study said that an estimated 4.5 million Brits or one in 10 will transfer funds between credit cards in the first quarter of 2010 to pay off debt. The average individual transfer is placed at £1,140.

However, as consumers try to clear debts, a separate study indicates that they tend to save less, according to the Building Societies Association. The BSA said its members withdrew more money than they saved for nine straight months into November last year to pay off debt. At least £775 million was withdrawn by BSA members during the month, it said.

Santander said consumers would like to take advantage of the zero percent introductory offers by credit card providers that convince many to repay their debts earlier.

Santander Cards director Emma Roberts noted a significant jump in the number of people transferring balances year on year. “This is clear sign that consumers are becoming savvier when it comes to managing their finances,” she said

Figures released by the National Statistics office indicated that the average UK household allocated 8.6 percent of the family income to savings in the three months to September in 2009. The figure was the highest level for any quarter in the last 10 years.

According to Adrian Coles, director-general at the BSA, there is little incentive for the public to be encouraged to save whilst the earning interest rates offered by the banks remain at its current low level. Consumers are more likely to repay debt than save.

“Building societies and other deposit takers are also facing heightened competition from institutions with a government guarantee, which is creating further distortions in the savings market,” said Coles.