Losses from defaults on credit card debt have risen unexpectedly, according to the Bank of England. The Bank’s latest quarterly Credit Conditions Survey also found that lenders think the trend will continue over the next three months.

The losses are thought to explain the recent increase in “spreads” on credit card lending. These are differentials between interest rates, which tend to widen as lenders seek to insure themselves against losses, indicating higher rates for the borrower.

With Bank of England figures showing credit-card interest rates averaging 16.68%, there’s no shortage of advice on how to handle card debts. Many of us find that, what with promotional offers, balance transfers and the like, we accumulate a collection of cards in our purses or wallet, and it’s always suggested we compare interest rates in order to pay off the most expensive first.

So-called 0% deals are tempting, but take account of balance-transfer fees, and watch the time limitation when a higher rate kicks in. Financial experts also warn that the strategy of paying off the minimum each month can backfire, with a relatively modest debt of say £3000 potentially taking several decades to pay off, because of accumulated interest.

For homeowners, consolidating a number of debts, either through remortgaging or a secured loan, is a further option. It’s important to bear in mind that you’re putting your home at stake as security here. But the simplicity of the single monthly payment can make financial management easier, and prevent payment slip-ups which are all too easy in the midst of a busy working week. Furthermore, given today’s lower interest rates on mortgage borrowing, the prospect of cutting regular outgoings can be a real attraction.

Tags: Companies, Economy, GoRemortgage, Mortgage Rates

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