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Christmas Credit Hangover

Monday, December 24, 2007

While the Federal Reserve is gratifying American credit consumers by lowering the prime rate, which by December, 2007 amounted to 7.50%, British credit card market will perhaps try quite the opposite policy. Millions of British households may experience an unpleasant hike in interest rates on mortgages and credit cards as soon as this Christmas.

They say it is going to be the biggest credit hangover in the last few years due to the disturbance on the British credit card market. Financial experts predict that because of the banks' refusal to lend each other money, customers will suffer from increased rates and hefty fees on credit cards.

Are British credit consumers doomed to such a disfavor and what is the real reason for the steep increase in borrowing charges? Well, according to a research, British customers will put as much as ?11.7 billion on their UK credit cards this Christmas and this is going to be a record.

In connection with this, banks will naturally make attempts at protecting their profits, which is going to spill over into higher credit card charges. It is easy to predict how it will tell on British households already suffering from and struggling with constantly rising mortgage payments and utility bills.

Not only will the charges hike affect customers with poor credit score and bad payment records, further pulling them into debt, but it will also hurt people with strong credit history and solid scores. It has been estimated that British credit consumers have accumulated as much as ?65 billion in debt due to the easy access to credit, regardless of their bad credit rating and arrears. Aiming at more revenues, credit issuers targeted their predatory policy at bad credit risks and even bankrupts, and as Christmas is approaching, all Britons seeking to make credit card deals will have to pay significantly more in charges.

Now all British credit consumers will have to pay for the reckless lending exercised by banks and credit companies.

However, the increased credit card charges are not the worst thing that may happen to British borrowers. You know that it is not infrequent practice to make a balance transfer on your current card onto another, lower APR credit card. This way, you save much in interest and kill your debt much faster.

But this time credit card balance transfer won't bring any significant relief, to be more exact it may be just impossible. Lots of cardholders looking to turn to another creditor to pay less in interest may simply be turned down.

The reason? In the situation when credit card debt has become a national concern, credit issuers have reduced the number of credit card deals made to protect themselves fro further risk.

The number of rejected applications will reach 50% this year, which will deprive consumers of the chance to get rid from debt on the one hand, and save money on the other.

Irresponsibility of banks and their loss of revenues have moved them to the policy of putting more pressure and restrictions on their customers. Yes, in recent years Britons have been able to get a credit card and even mortgage at the snap of fingers, but today they will have to pay for it in stricter terms and hefty rates.