A debt organisation has warned that millions of people across the UK are at risk of over expenditure after their credit card limits were increased.
Over four in ten people have seen their credit limit increased in a change that left many card users scratching their heads in confusion. The reason for this confusion is the fact that none of these people actually requested a rise to their maximum limit.
Many of these customers have stated that they are happy with the rise, and are confident in their ability to repay the amounts that they will now be able to borrow.
However as many as 19% of the people asked, in a survey carried out by the Debt Advisory Centre, have stated that they now feel nervous about their ability to repay the debts that this new limit will allow them to amass.
15% of the people question in this survey stated that they felt frustrated that their credit card supplier had upped their limit without asking the account holder first.
On average, customers saw rises of £750 although more than 30% of account holders reported that their limit had gone up by £1,000.
While all of these customers are well within their rights to request that their limit is reduced, the survey found that only 25% of people affected had chosen to do this.
There is a growing concern amongst economic analysts that many UK households are taking on an ever increasing level of debt. Many of these studies suggest that these households may be unable to manage these debts are interest sets eventually start to rise.
According to PWC, the average credit card user currently owes just over £1,000. This is high when we consider that it is only around £40 lower than the record high average of 2010.
If the levels of debt continue to rise at their current rate then it is estimated that the average level of debt per household could hit £10,000 by the end of 2016.
If this does happen then it would represent an unprecedented level of debt in this country.
Low Interest Rates Wonít Last Forever
One of the primary causes for concern, with regards to the growing level of debt in the UK, is the fact that many customers are being drawn in by the low levels of interest that they have to pay on these loans.
Interest rates set by the Bank of England have stayed at 0.5% for the last 6 years. This is now expected to continue into 2016. However this low level of interest will not last forever.
Once interest rates eventually start to go up, the households in the UK will have to pay more and more each month just to repay their loans. This will place a higher strain on the incomes of these homes.
There is a very serious worry that if incomes do not rise at a rate faster than, or equal to, the interest rates on these loans, then millions of people across the UK will have extreme difficulty paying off these debts.
Credit Limits Raised
The people who are most likely to have seen their credit card limits go up are 25-34 year olds. In this age range, over half of credit card users have seen their limits raised. Only 40% of people over the age of 55 have had their limits raised, this represents the lowest proportion of any age group.
The rise in limits also varies depending on where you live. If you live in London then a total of 58% of people have been affected, this drops to 50% in the Midlands and only 42% in the North.
A spokesman for the Debt Advisory Centre stated:
‘Credit cards can be a great financial help when used properly. However, they can also be a way for consumers to find themselves in unmanageable debt. While it might feel comforting to have available credit, it would be ill-advised for a consumer to take on more credit than they are able to pay back, even if their credit card provider feels they can handle it.
‘If anyone finds themselves in financial difficulty, they should seek help and advice from a reputable service.’
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