Credit card debt transfers ‘risky’
Released
on: October 1, 2008, 8:48 am
Press
Release Author: Gregory
Pennington
Industry:
Financial
Press
Release Summary: Debt management company Gregory Pennington have
said that the predicted increase in consumers transferring debts
between credit cards is another sign of rising costs of living
limiting people’s ability to meet financial commitments,
and warned of the dangers of credit card transfers as a means
of debt management.
Press
Release Body: Responding to findings that many credit card holders
are transferring their debts onto another card, debt management
company Gregory Pennington said that this is
another sign of rising costs of living limiting people’s
ability to repay debts, and warned of the risks involved in transferring
debts between credit cards.
The
report by Abbey showed that almost a quarter
of people with credit cards will transfer on average £1,600
of debt to another card in the next year.
Abbey
said that borrowers are opting for cards with 0% interest
periods in order to avoid their debts getting any bigger, and
switching to another card once the 0% period is over.
A
spokesperson for Gregory
Pennington commented: “Most
of us are now feeling the pressure of a weakening economy in one
way or another, and for those people in debt, it can be an extremely
worrying time.
“Credit
cards with 0% interest periods can be very tempting, because they
essentially stand for ‘free’ money, if only for a
limited time. Unlike many forms of debt, interest won’t
grow in these accounts until the 0% interest period finishes,
which is very appealing to people struggling with debt.
“This
particularly applies to people with credit card debts, because
once the lenders do start charging interest, it tends to be very
high. The average APR on a credit card is currently around 17.4%.”
Taking
advantage of the best deals around makes sense, but the spokesperson
warned that ‘juggling’ debts between credit cards
is potentially dangerous if used as a means of debt management,
and should not be considered a long-term solution.
“Every
credit card you take out will be listed on your credit rating,
and while abiding by the terms of a credit card reflects well
on the borrower, some creditors may become concerned if they see
you have had a string of credit cards for only a few months at
a time,” she said. “In this sense, your credit
rating could suffer.
“Eventually,
it’s possible that lenders will start refusing applications,
or reduce the credit limit – which is especially a risk
with the credit crunch ongoing. If that happens, borrowers can
either repay the debt in full, or face high interest rates that
can cause the debt to grow very quickly.”
The
spokesperson continued that there are cheaper, more effective
debt solutions available. “A debt
management plan or debt consolidation loan might be a better
option for people trying to manage their credit card debts. Both
set out affordable payment plans that can be scheduled over a
longer period of time – although it’s important to realise that
the longer the repayment, the more interest can build up in the
long run.
“For
those with more serious debts of around £15,000 or more, an IVA
(Individual Voluntary Arrangement) could help. An IVA allows
people in debt to repay only what they can realistically afford.
They do this over a fixed period, normally five years, after which
any outstanding debt is written off. An IVA may, however, require
a homeowner to free up some of the equity in their home. It also
requires a real commitment to making regular monthly payments
and has a significant impact on an individual’s credit rating.
We advise people to speak to an expert debt adviser before making
a decision.”
Web
Site: http://www.gregorypennington.com
Contact
Details: Melanie Taylor
melanie.taylor@gregorypennington.com
0845 056 6480
Pennington
House
Carolina Way
South Langworthy Road
Salford
Greater Manchester
M50 2ZY
2012
