Credit card usage up in January 2012

23rd January 2012  

After the flurry of retail excitement over the Christmas period, it seems that more people than ever will be relying on their credit cards to carry them through the chilly doldrums of January. In its fifth annual outing, the Post Office Consumer Credit Report predicts that more than a third of credit card holders will rely on their flexible friend for everyday purchases in January, while over two million people plan to spend more on their cards this month than during the same period last year.

So is the reluctance among credit card holders to use their cards finally lifting, or is it a sign that there is still very little hard cash around and consumers are simply falling back on credit? It seems that the latter may be true. One in ten of those questioned said that they will need to use their credit card to pay utility and outstanding Christmas bills. Almost four in ten say that their credit card spending will increase by up to £200 this month.

There are those who are using their credit cards for luxury purchases, such as holidays and hitting the January sales. But the majority of card users admit that the increased cost of January will mean that they have to budget more carefully during the rest of the year. 6% of those surveyed say there is a real concern that they will be seriously overstreched because of an increase in debt.

Commentators are concerned that it marks a slide back to the ‘bad old days’ when the consequences of credit were not considered carefully enough by borrowers, and that it could lead to greater debt problems later on in the year for some consumers.

Balancing the credit card ‘books’

Apparently, the credit crunch isn’t over, then. So what can concerned consumers do to ‘quantitatively ease’ their own financial situation? The advice is to check and check again on those interest charges, additional fees and other costs that can quickly mount up to make a debt unmanageable. January usually sees a flood of new 0% interest card offers and balance transfer options. If your credit rating is good, act now and balance transfer over to the top 0% offer, or even consider a low rate for life card.

The consumer pundits also recommend that if you have a number of debts spread across different cards, a wise move might be to consolidate those smaller debts onto one ‘0% on balance transfers’ card to reduce the amount of interest you may be paying.

It’s time to balance the books. If you are facing a bleak January and, no matter how reluctantly, you’re forced to break out the credit cards, don’t panic. It doesn’t have to inevitably lead to greater levels of personal debt. A little forethought and financial management could result in a far more secure 2012, free of sleepless nights worrying about mounting interest rates or dreading the arrival of the postman.

Consumers have learned to manage their finances far more effectively over the last three years, and certainly lessons have been well and truly learned since the last credit-induced recession. There’s no reason to worry that a little extra spending in January will send your finances into freefall, as long as you are aware of the consequences and how to minimise their impact.

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