Families tackle credit debt as they brace for income squeeze
Consumers pay off €24m ahead of Budget 2010 reductions
Related Articles
CONSUMERS are slashing their credit card spending as they tighten their belts for huge reductions in overall income.
New figures show they have cut €24m off credit card debt as they brace for cuts in household earnings and a range of state benefits.
Social welfare payments and public sector wages will drop from January 1 as the effects of Budget 2010 are implemented.
Parents with young children will be hit by the double whammy of the complete end to the early childcare supplement and a cut to child benefit.
Dental care, drugs and new eye-glasses will all also be more expensive with health bills facing a substantial hike as the Government's plan to cut €4bn in spending takes hold. The cost of health insurance will also go up from the start of the year.
But new figures indicate that people are getting to grips with credit card debt for the first time in years, while also cutting back on other loans. Young people continue to shun the property market.
Households are paying down debts as they prepare for reductions in income, cuts in child benefit and other welfare payments. The cut of €16 a month per child in child benefit is effective from the New Year and will impact on the parents of around one million children. The early childcare supplement, which was worth €1,000 a year for children under five, also ends on January 1. Most other welfare payments are also set to fall by 4pc from the New Year.
Pressure
Pay cuts in the private and public sectors, the pensions levy in the public sector, and the income levy on all incomes, are putting unprecedented pressure on family finances.
But canny consumers are reacting to the income hit by finally getting the overall amount they owe on their credit cards down. New statistics from the Central Bank yesterday also show other forms of lending are weak as consumers continue to retrench.
The figures show that lending to households, excluding mortgages, dropped by 21pc in the year to November.
But one of the biggest retreats in spending has been on credit cards. Shoppers have been consistently paying off more than they are spending on credit, but up to now the card payments have been eaten up by interest charges and other fees.
However, new data for November shows card holders paid down almost €860m that month on some 2.17 million personal cards. It was the ninth month in 2009 that consumers paid off more on their cards than they spent using them. They spent €811m on credit cards, taking the overall amount owed on all personal and business credit cards down to €2.9bn.
This meant the overall amount owed on cards was down €24m from the previous month, and the outstanding debt figure was lower than the amount owed on the plastic cards in the same month in 2008. The figures exclude payments on debit cards and store cards.
- Charlie Weston
Irish Independent
