Millions keep up with their household bills, as well as paying for luxury items, using their credit cards. Many people choose to make just the minimum monthly payment which only serves to worsen credit card debt and financial problems.
The Scale of High APR Credit Card Debt
According to research by the Consumer Credit Counselling service (CCCS) in Q3 2008 , "The average UK adult has debts on credit cards approaching £2,300. Clients of CCCS owe on average over £14,000 on credit cards. CCCS counsellors are now dealing with almost 50,000 credit card debts every month, 3.5 times more than three years ago."
Debit Cards vs Credit Cards for those Struggling with Debt Problems
High APR credit card debt is one of the biggest sources of debt problems facing people today. Credit card debt is avoidable, but it is all about understanding yourself. If controlling spending is an issue, it is best to close down credit cards and use a debit card. If debt problems are a regular source of worry, remember to minimise personal overdraft limits as they are equally as bad as credit card debt.
Credit Cards and Cash Advances
Credit card cash advances charge a higher APR than regular credit card debt. There is also a cash advance charge for making the withdrawal. A credit card cash advance could constitute a simple withdrawal from a cash point or using a credit card cheque. Gambling transactions also constitute a credit card cash advance.
Credit Card Refunds - Section 75 Consumer Protection Act 1974
A customer is entitled to a credit card refund on purchases between £100 and £30,000 under section 75 Consumer Protection Act 1974 should a problem arise. Examples include: where the retailer goes bankrupt prior to delivery, the item is never delivered because it was lost or damaged in transit or the goods were faulty. No protection is provided on debit card purchases.
Credit Card Debt and Debt Solutions
Credit card debt is an unsecured debt, thus it can be included in any debt solution. Rather than make minimum monthly payments on credit card debt, it may be better to pursue a debt solution, such as a debt management plan or Individual Voluntary Arrangement. This could free up additional money for household bills.
Credit cards can be a useful way to negotiate household bills for those that are good with money. For others, they are a sure-fire way to develop credit card debt. Most people know which category they fall into. Those that do struggle with personal debts are better off using their debit card.
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