Posted by Allison on 5 April 2009, 11:04
It is well known that credit card debt in Britain is very high. The economy was very buoyant for a long time, which led people into an inevitable false sense of security. People on low incomes lived way beyond their means, seemingly secure in the knowledge that they could simply 'stick in on the credit card and worry about it later.'
But now it is later, and those same people are starting to wake up and realise that they have got money problems way beyond any they may have had in the past. The usual spiral into debt results in taking out credit card after credit card, to bounce around the debt they have already amassed, and free up more of their ever increasing credit limit to spend on the things they want but cannot afford to get any other way.
It's clear that the current situation with the possibility of a recession is having a profound effect on these people. But is this a situation that is unique to Britain, or do people living in other countries struggle with the idea of having credit cards and high credit limits as well?
The type of currency shown on the credit card bill may differ from country to country, but in some cases that is the only difference. It seems that people from all corners of the globe have fallen into the same money trap that many Britons have. People living in Turkey have contributed to ever increasing debts on credit cards that have gone up by more than 500% in the past six years. That's a remarkable – and slightly alarming at best – increase.
So it seems we are not the only country to be suffering now that things are changing and the boom is heading for the bust. But are all countries affected?
It seems not. In fact Sweden shouldn't have too much to worry about at all, thanks to the laws that govern that country. They are so strict that many UK credit card holders who have managed to amass a great amount of debt would probably go white at the thought of how these laws would affect them.
Let's take an example to reveal just how severe this particular law would be if it were brought in in this country. Let's suppose you have £8000 in credit card debt in your own currency. That will sound like a lot of money to some people but to others that amount comes in at far less than they have on the plastic.
Now what would you say if someone told you that you had to pay the grand total of £4800 this month off that debt? You would be forgiven for panicking and wondering where to get a loan from to cover that amount – but that is exactly how the Swedish system works.
Their laws state that 60% must be paid off your card every month. So whatever you have bought on your cards and however much you have spent in total, you won't have the luxury of paying it off as and when you want to. In essence it's the same system we have over here – pay off a minimum percentage each month – but our minimum tends to be around 3%, or 5% at the very most. 60% by contrast is a huge amount that would bankrupt many of Britain's heaviest card users in days.
The fact is that while people in many other countries are struggling to meet the repayments on their credit cards each month, many of the credit card users in Britain are contributing to an alarming statistic. The vast majority of credit card debt in Europe is down to no one else but the Britons.
Clearly it will take some time – and some drastic changes – for the situation to be any different to how it is now. Britain as a whole has come to rely on the credit card as a crucial part of everyday life. Everything gets put on it and we worry about it when the bill comes. We pay off what amounts to the interest and the whole cycle starts again.
We live in a society which is hypnotised by consumerism. You won't be surprised to learn that the situation in America is just as bad as it is in Britain, with the majority of adults holding onto a huge debt on their credit cards. The culture of wanting everything now is what defines us today, which is very different from how things used to be.
Before credit cards were invented a few decades ago, we had to save up for what we wanted, otherwise we couldn't have it. It was that simple. Once credit cards came into existence we suddenly realised that we could have what we wanted today by just handing over that small piece of plastic. We were so caught up in the excitement of this idea that we couldn't see past it to the consequences that now lay further down the road than they did before.
It will be interesting – and probably alarming – to see what happens in the coming months, to see how any probability of a recession will affect the huge debts that people are trying to manage. Most people are so close to not being able to make ends meet that it would only take a rise in interest rates to send them over the edge. Indeed, this is what many people are expecting will happen.
If you have personal credit card debt yourself – regardless of what country you are in and what currency the debt is in – now is the time to start tackling it. It won't go away on its own and if you are paying no more than the minimum each month you will never clear that debt.
So take charge of it and prevent yourself from becoming another statistic. Buck the trend and make a difference to your debt and to your life.