Friday, May 17, 2024

Effective Ways to Get Out of Debt

Like the United States, the United Kingdom is no stranger to debt. Of all the cities in the UK, London ranks at #1 with the highest level of credit card debt according to Experian. Fueling rising debt levels in London are millennials renting in the city. The two areas that are most susceptible to high levels of debt are Putney and Wandsworth. In terms of credit card debt, Bishopsgate and Liverpool Street ranked at the top, while Cheapside and Westend were close in tow.

According to the Bank of England (BoE), the April value of outstanding credit card debt was £68.1 billion. The 5 areas that contribute most to credit card debt in the UK are Edinburgh, Glasgow, London, Aldershot, and Hatfield. A consultant from Experian, James Jones, stated that Britons are much more dependent on credit facilities today than they were 20 years ago. Added to that is the fact that approximately 50% of young people must resort to borrowing, or going to their parents to pay for unexpected bills. This is evidence of a ‘cash crunch’ in the UK among millennials.

Dealing with Debt

Meanwhile, credit card holders in the United Kingdom have been given a form of relief by the FCA (Financial Conduct Authority). Lenders have been instructed to help customers who cannot make minimum monthly repayments on their credit card debt. According to the FCA, 3.3 million people in the UK are locked in a debt cycle where they have repaid more in interest and related payments than they have on the principal of their debt. The FCA believes that credit card companies are profiting off these low-income earners since they are generating consistent profits with little change to the initial borrowed amounts. The FCAs guidelines are designed to pressure lenders to assist, while borrowers seek out various debt relief options of their own.

The debt threshold timeframe is 18 months. In other words, if persistent debt exists for 1.5 years, the FCA is insisting that lenders pressure customers to make payments quickly to avoid escalating debt. If the numbers are correct, customers could save up to £13 billion within the next 17 years. The CEO of the FCA, Andrew Bailey, believes that there is tremendous merit with credit cards, however the minority of customers who are in persistent credit card debt is a troubling sign for the UK economy. For example, £25 is being paid for every £10 repaid. This makes it incredibly difficult to get out of debt. It works against the interests of banks and credit companies to comply with FCA requirements, but regulation will force the issue.

Many Britons ‘Clueless ‘about Credit Card Interest

According to MoneySupermarket, approximately two thirds of Britons check their credit card statements once every month. However, the more troubling statistic is that 13% of Britons have no idea about the interest repayments on their cards. Perhaps the most alarming finding is that over two thirds of Britons have not checked their credit score in the past year, and over 20% wouldn’t even know how to do that. Borrowing has risen sharply since the June 23 Brexit referendum. According to statistics, 48% + of Britons have a credit card balance every month and the number of those with increasing debt burdens is rising sharply. While debt is relatively cheap in the United Kingdom, the Bank of England may surprise everyone and start to taper quantitative easing towards the end of the year. However, rising prices and stagnant wages are contributing to increasing levels of debt in the economy.

Sam Allcock
Sam Allcock
Sam heads up Cheshire-based PR Fire, an online platform that has already helped over 10,000 businesses to grab widespread media coverage on their news at an extremely accessible price point.

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