UK Credit Crunch

It was announced at the beginning of 2009, that Capital One, one of the UK's largest credit card providers, will be increasing credit card rates by 14 per cent. The company justified the rate hike in a notice to clients claiming that it's costing them more money to lend funds due to "changes in the credit environment." There is certainly a change in the economy that is affecting Brits across the nation. This is a fact that's difficult to dispute. The changes are hitting households in a variety of ways.

British consumers that have found themselves in financial trouble with credit debt are being offered a lifeline. The UK government has recently intervened on their behalf with some new directives. They have outlined new regulations that give credit cardholders a 30 day grace period to consult with the Citizens Advice Bureau in reference to their money woes. There is an additional 30 day period in which payment demands will remain on hold while consumers attempt to work out repayment plans with creditors.

The Citizens Advice Bureau is a charity organization that helps people resolve legal and money problems by providing free, independent and confidential counseling. The organization has over 3,200 locations throughout the UK. The group also works to influence policymakers concerning consumer issues, debt problems, and other areas of public concern.

The government is also forbidding credit card companies from changing their interest rates during the first 12 months of a new customer's business. This protection has been enacted due to complaints surrounding major increases in interest rates only weeks or months after accepting a promotional offer by a credit card company. This is good news for most credit card consumers. There will probably be far fewer lower introductory offers with rock-bottom interest rates extended to prospective new customers as a result, however.

There are signs that Brits are starting to take notice of the seriousness of the current credit crunch. Research by Abbey credit cards show that more than 50 per cent of those in the UK have cut back on dining out at restaurants and pubs. The survey also reflects a reduction in British carry out trends as well. Many are opting to cook meals at home in an effort to cut back on living costs. Most credit counselors agree that charging restaurant meals is not a good financial practice so this is an encouraging trend.

According to an Abbey Banking study in October 2008, disposable income has decreased 29 percent compared to two years ago. The study indicated that most Brits are spending about 75 per cent of their cash on "essential" items such as rent or a mortgage, food, and other household bills. Two thirds of UK citizens typically are out of money before payday according to the report. These are some disturbing statistics but are a true reflection of many individuals' financial situation. This report makes it clear that individuals need to improve in the areas of budgeting and planning.

There are many changes occurring in the present economy. UK citizens are feeling the pressures of the credit crunch along with many other countries throughout the world. There is some amount of hope on the horizon, however, as Brits adjust their attitudes and the government reaches out to consumers with new regulations.