Martin Lewis gives an overview on what a credit card is
Rishi Sunak reportedly hopes those who have managed to save during the pandemic will spend once normality returns, keeping the economy afloat. While the Chancellor likely didn’t mean to be insensitive, his comments were met with criticism from many who likely were struggling just to keep their head above water throughout 2020 and may have been forced to take out debt to survive.
Steve Wiley, the Chief Executive Officer of Monva, highlighted just how tough last year was for many people: “2020 has been a challenging year for UK consumers, particularly those carrying personal debt.
“With a limited selection of credit products on the market, many vulnerable consumers have been left unsure about how to take back control of their rising debt.
“Our research shows that two fifths (43 percent) of UK adults are worried about their personal finances as we move into the new year and 40 percent admit to feeling unsure how they will pay back any debt they will carry over into January.”
Despite this pessimism, Steve expressed hope for the coming months as lenders may expand their products and offers: “Nevertheless, 2021 presents a good opportunity for consumers prepared to face up to their debts and take back control of their finances post-Christmas.
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“Throughout 2020, ongoing uncertainty meant credit card and loan providers held back on lending.
“However, as we move into 2021, there is potential for a flood of new offers from lenders as they try to win business and catch up on the lost activity from the last 12 months.
“In the new year, we expect new and attractive zero percent Balance Transfers credit card offers to come onto the market, allowing those carrying debt to park it in a low interest product, giving consumers greater peace of mind.
“But if 2020 has taught anything, it is the importance of getting our finances in order, so we are prepared for whatever life throws at us.
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“Even though we would encourage consumers carrying credit card debt to take advantage of these low interest offers, we also recommend borrowers increase their monthly repayments where possible to repay debts sooner and ideally within the Balance Transfer offer window.”
Credit cards are not the only debt product likely to see change in the coming months according to Monva’s analysis.
Looking into personal loan deals could also be viable, as Steve concluded: “Of course, balance transfer credit cards are not the only option for those facing New Year’s debts.
“Personal loan headline offers are still incredibly competitive, and so consumers could also consider consolidating their debts into a low interest personal loan.
“Those considering this option should weigh up the overall cost of a loan over a longer-term period vs the cost of a balance transfer credit card, including the associated balance transfer fees.
“In both cases, for credit cards or loans, using a comparison service with an eligibility check is essential to protect your credit rating and provide access to pre-approved and guaranteed rates (in the case of loans) before applying.”
Credit cards, personal loans and other forms of debt-themed financial products can currently benefit from payment holidays, with the FCA extending this support into March.
While this should ease consumer’s worries for the months ahead, it should be noted that credit ratings, which have been protected throughout 2020, will once again face repercussions from April.
Justin Basini, the CEO of ClearScore, recently warned that if this is overlooked, consumers could face a difficult time accessing any financial products in the summer.
Justin made the following comments in ClearScore’s “State of the UK’s Personal Finances in 2020” review: “Once the credit score amnesty ends in March 2021, it could take up to three months for consumers to see any change to their credit files if they are unable to meet repayments for their credit products.
“This is due to different lenders taking varying amounts of time to report to credit reference agencies.
“This could result in thousands, if not tens of thousands of people, unable to take out new financial products to manage debt and improve their financial situations.”
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