Asda Financial services latest news on Credit Card

Credit cards 'used to pay bills'

Research has revealed that one in seven credit card holders in the UK are regularly relying on plastic to pay for their household bills such as gas and electricity.

Meanwhile, the moneysupermarket.com study suggested a further 7% fall back on their trusty credit cards to obtain cash.

Around half of Britons are using plastic to purchase major items such as TVs and DVD players, while 43% use handy and easy-to-carry credit cards to pay for everyday transactions like grocery shopping and 38% to pay for petrol.

It seems likely that an increasing number of consumers are using credit cards to pay for everyday items in order to obtain rewards, taking into account a recent increase in the number of rewards credit cards on the market.

Protection from high interest rates

Consumers have been promised a better deal from financial services firms through a series of Government proposals.

Excessive interest rates on credit and store cards may have seen their day if measures are introduced by the Conservative-Liberal Democrat coalition.

Unfair charges on bank accounts and other financial transactions may also never see the light of day again if the plans are successfully made law.

People will be given a seven-day cooling off period after taking out a store card, while credit card companies will also be obliged to give better information to their customers in a standard format, so that they can tell whether they are getting the best deal.

Income protection can also be used as an extra level of security to help meet credit card payments if a person becomes unable to work through illness or injury.

The Government plans to create a free national financial advice service, which will be funded in full from a new social responsibility levy on financial services firms.

Giving full details of the coalition agreement, ministers said: "The Government believes that action is needed to protect consumers, particularly the most vulnerable, and to promote greater competition across the economy."

The coalition also said energy companies would have to provide more information in their bills on how to switch to their cheapest tariff, as well as giving people details on how their energy usage compared with similar households.

It added that people with Post Office Card accounts would also be able to benefit from direct debit discounts, while firms would have to ensure that their social tariffs offered access to their best prices.

Thrifty consumers shun credit cards

Britons trying to drive down their debt are helping shrink the credit card market, analysts claim.

Cash-strapped consumers are becoming ever more thrifty, with research showing we're all on the hunt for cheaper car and home insurance, as well as cheap gas and electricity deals.

Datamonitor predicts £3.1 billion less being spent on credit cards this year, a 2.7% fall to £110.59 billion.

The slide comes after the market contracted by a record £7.8 billion in 2009, and the group does not expect it to return to growth until 2011.

Even then, the total value of transactions is only expected to rise to £113.37 billion, still well down on the peak of £121.4 billion reached in 2008.

The research also found there had been a 10% fall in the number of credit cards in issue during 2009, as issuers aggressively reduced the number of dormant accounts people had.

The group said the outstanding balances people had on their cards was also falling, as was the value of the average transaction. This dropped to £62 in 2009, down from £64.90 the previous year, and is expected to fall further in 2010 to £60.70.

It said that during most months of 2009 the total value of transactions was between £1 billion and £1.5 billion lower than it had been a year earlier, which it warned was impacting on card providers' revenue.

Consumers continue to cut debts

Cautious consumers continued to cut back on spending in February to work at reducing their debts, figures show.

Most are being careful not to take on new borrowing as the fragility of the country's exit from recession puts finances in the forefront of people's minds.

Net consumer credit - the amount the population borrows on credit cards, loans and overdrafts - remained broadly unchanged during the month once repayments were taken into account, the British Bankers' Association said.

Fears over rising unemployment levels could also be contributing to the unwillingness of consumers to splash out on new items using borrowed money, and could help explain a move by many to build up a "savings safety net" to help in the event of redundancy.

Income protection insurance, that pays out a monthly sum for up to a year if someone becomes unemployed, has also been rising in popularity in the downturn as people seek to protect themselves financially.

Borrowing through credit cards rose by £241 million, in line with the recent trend, while lending through loans and overdrafts contracted for the 15th month in a row, with consumers repaying £257 million more than they borrowed.

At the same time, people increased their savings levels by £4.3 billion, the highest level for more than a year and well up on both January's figure of £2.6 billion and the recent six-month average.

The group said subdued consumer spending had led to unsecured debt contracting by 1.7% during the past year, while personal deposit levels increased by 5.6%.