Personal debt is at a new high. Borrowing vs. spending has gone through the roof, and outstanding personal debt in the UK now stands at £1.4 trillion. This is up from last year, with 274 people being declared bankrupt or insolvent every day. This equates to one person every 5 minutes.
They are pretty worrying stats – but it might surprise you that there’s quite a bit you can do fairly quickly to rectify your money situation. One of the things you can do is wise up about the best way to use your credit cards and manage your debt – mismanagement is one of the most common causes of debt spiralling out of control. Here are 10 things that may surprise you about credit cards, and how you might be able to act to avoid getting into unnecessary financial difficulties.
- The Diners Card was the first credit card available for consumers. Released in the US in 1950, it provided wealthy club members the opportunity to pay for “travel and entertainment” goods and pay for them (in full) later.
- Poor credit rating affects interest rate: if you have a credit rating that’s poor and you miss payments, you’re considered a high risk customer and therefore your bank will push your credit card up. Make sure you take note of the range of cards that banks offer
- You Can Complain. If you feel like you have been misled by your credit card company, you can complain and raise any issues. The financial ombudsmen should be able to help.
- In the UK, there are more credit cards than people
- If America piled all their credit cards on top of each other, the tower would reach 288 miles high
- Building your credit is best done by using your credit card but making sure you may it off in full every month. You need not always carry a balance on your card to build your rating.
- Having a large number of credit cards may negatively impact your credit score
- Don’t be afraid to close an account which has an annual fee to use it. There’s no point – there are so many other credit cards which offer free usage, balance transfers and interest rates
- Learn the difference between bad debt and good, acceptable debt. Student loans, mortgages and even car loans are good debt as they contribute to your overall credit rating further down the line. Credit cards make people assume you’re spending money on things you can’t afford.
- If you were alive when Jesus was born and spent a million dollars EVERY SINGLE DAY since then, your total expenditure still wouldn’t equal America’s collective credit card debt in 2013 (Thanks for Info-Wars for that one!)
If you have a certain amount of bad debt that’s manageable, you’re likely to be okay. The problem with bad debt though is that it’s hard to keep track of, and people can easily be flummoxed by making sure that all payments are completed on time.
One of the keys to managing your money is managing your debt, controlling your assets and realising early on that you can’t buy wealth or success. Being patient and modest when accumulating wealth is the best way to go – credit cards do not buy financial freedom and over time it’ll be more and more difficult to fool people.
If you would like more information on debt, personal insolvency or other financial based topics, contact us today at Gibson and Associates to find out how we can help you.