You are here: Home - Credit Cards & Loans - News -

MP calls for credit cards to come in line with payday loans

Written by:
A fifth of all British adults are worried about their credit card debt, according to research from left-leaning think tank the New Economics Foundation.

It showed that over four in ten (41%) are struggling to make it to payday and of these, half (50%) are worried about their credit card debt. Labour MP Stella Creasy warned Parliament must learn the lesson of payday lenders about intervention to prevent problem debt. She would like to see a cap on the cost of credit.

Creasy led the parliamentary efforts to secure a cap on the costs of payday lending and will host a debate in Parliament later this year calling for the 100% cap on payday lenders to be extended to cover credit cards.

The research also found that 40% of adults say they often or sometimes struggle to make it to payday and of those, nearly a third (31%) do so because of having to make credit card repayments.

Credit card debt tends to be associated with low financial resilience. Only four in ten (41%) of those with outstanding credit card debt at the end of the month are deemed ‘financially resilient’ by the Financial Conduct Authority (FCA). The rest are either ‘surviving’ (36%) or ‘in difficulty’ (23%). More than half (52%) of those with credit cards are ‘potentially vulnerable’, meaning they have few resources to fall back on if faced with a health problem or job loss.

Knowledge is poor, with 28% of credit card holders unaware of the APR (annual percentage rate) charged.

Stella Creasy, MP for Walthamstow, said: “Millions of people are ‘zombie debtors’ – paying the interest but not the capital off on their credit cards – and two million more are in arrears. With the FCA data itself showing five million of us will take 10 years or more to clear our credit cards, there is a simple principle at stake – why do we cap payday loans to disrupt these spirals of debt but leave millions facing exactly the same problems of being stuck in a debt trap with credit cards?

“If the FCA is timid on this, then the government should act and bring in legislation to require them to cap credit cards too and protect millions of consumers. We took too long to act as a country on the damage the likes of Wonga were doing. We must not make the same mistake.”

Andrew Pendleton, policy director at the New Economics Foundation, said it was “immoral and unfair” for lenders to be able to charge so much for credit. He added that it was also bad for the economy, with money ending up in the coffers of greedy finance companies rather than being spent by families on essentials.

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

Are you a first-time buyer looking for a mortgage?

Look no further, get the help you need by searching for your perfect mortgage

A guide to switching energy provider

All you need to know about switching from one energy supplier to another.

Which ISA is right for you? A round up of the six products available in 2017

From cash to innovative finance to lifetime, here's our guide to the ISA products available to savers this yea...

Guide to buy-to-let tax changes

In late 2015, former Chancellor George Osborne announced a range of  tax measures aimed at landlords, which t...

What will happen if rates change

How your finances will be impacted by a rise in interest rates.

Regular Savings Calculator

Small regular contributions can build up nicely over time.

Online Savings Calculator

Work out how your online savings can build over time.

Five fund tips for a 0.25% interest rate environment

With interest rates stuck at a record low 0.25% and expectations rates could fall to close to zero, here are ...

Protecting family wealth: 10 tips for cutting inheritance tax

Inheritance tax - sometimes known as 'death tax' - can cause even more heartache for bereaved families. But th...

Travel insurance: Five tips to ensure a successful claim

Ahead of your summer holiday, it’s important to make sure you have the right level of travel cover or you co...

Investing your money

Alliance Trust Plc gives you smart insight into how to invest your money

Money Tips of the Week

Read previous post:
young workers
Government’s ‘Good Work plan’ enshrines rights for workers

The government has issued its response to the Taylor Review, promising an improvement in employment rights for millions of people...