April 28, 2009
Credit Cards Still Hitting Borrowers
New research has found that credit card companies are still hitting borrowers where it hurts with increased fees and even higher interest rates for those withdrawing money from the card.
Research from uSwitch.com has shown that 7.3 million, or around a fifth of credit card customers use this facility around five times a year, making average withdrawals of just under £100 every time. These consumers make a total of 38 million withdrawals every year, racking up £161m in interest charges alone.
On average the per annum rate applied to cash withdrawals on credit cards has increased by 3.05% in the last two years, from 23.65% to 26.7% today. Across the industry, charges for this facility vary and in the last year alone, some providers have increased this rate by as much as 4%.
Louise Bond, personal finance manager at uSwitch.com says: “We strongly advise customers not to use this facility on any credit card unless they are really desperate for the cash. Interest is applied to credit card cash withdrawals from the day they are made and the APR is generally far higher than that applied to purchases.”
This illustrates perfectly why you need to always be thinking about managing your money. Taking money off of your credit card should only be done in an emergency, otherwise your credit card bills are going to soar exponentially. And those with larger credit card balances will carry on being hit, as cash goes to the ‘bottom of the pile’, meaning you pay the higher rate on the withdrawn amount until you can pay all the balance off.
So do what you can to limit unnecessary unsecured payments, and try and keep your credit usage to a minimum. The only way to clear debt and move forward is to make sure you are paying as little as you can for you, whenever you can.
SOURCE: Uswitch.com, 23/04/09
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