Credit cards likely to be scarcer next year

Consumers continue to be squeezed on their credit cards and one in five closures are due to cardholders not meeting their monthly payments. 

Yorkshiremen and the Scots are always reckoned to be the most canny where money is concerned, but cardholders in Yorkshire are the worst offenders with 35% of accounts closed by the providers due to repayment failure, according to comparison website Confused.com.  The south east is not much better with 33% of closures due to repayment defaults.

‘Credit card users in all regions need to understand how damaging it can be to miss repayments,’ explains Joanne Garcia, head of credit cards at Confused.com.   ‘While it may not seem like a big deal to miss a few payments here and there, credit providers – which include mortgage lenders – leave no stone unturned when it comes to checking a person’s creditworthiness. It they see a history of non-payments it makes it much more difficult to borrow money.’

She, very sensibly, advises those who are struggling to make repayments on time to set up a direct debit for at least the minimum payment each month. Clearly it will pay to shop around for a low interest card – which are not so easy to find and even more difficult to obtain now that the card issuers are applying much tougher credit criteria.  They are being leant on by the regulator at the same time as suffering rising bad debts. 

‘Consumers are likely to pay the price of increased average APRs, something we have already seen happen over the course of 2009,’ warned, Peter Harrison, credit cards expert at Moneysupermarket.com.  ‘In January this year, the average APR was 17.06%.  This has now risen to 18.22%.   For those only making the minimum payments on their credit cards with a balance of £2,500 it would take a further nine months to pay off the debt at the new rate - with an additional £213.33 in interest.’

But he points out that, ‘our research found that almost a third of credit card users have no intention of paying off the balance of their credit card in the next six months, highlighting that reliance on credit remains.’

He warns, ‘consumers should be aware that credit cards are likely to be more difficult to come by next year, so it is likely that borrowers will have to turn to their current account provider to obtain a suitable deal.’

This will be OK for Barclays customers if they can persuade their bank manager to recommend them for a Barclays Platinum Simplicity Visa card which has an interest charge of just 6.8%.  This rate also applies to balance transfers from other cards and there is no transfer fee.