Hard-up consumers bin 100,000 credit cards
Published 23/03/2011 | 05:00
CASH-strapped consumers are cutting up their credit cards in record numbers as the recession continues to bite.
Around 100,000 credit card accounts have been closed in the past year, an analysis of recent figures by the Irish Independent shows.
Some of these accounts may be a second or third account held by the same card holder.
Consumers are also paying off card debt at record levels, with €191m paid off in the past year alone.
An examination of Central Bank figures shows cardholders have made massive efforts to get to grips with their debts, with the amount owed down from a total of €2.9bn at the start of 2010 to €2.7bn now.
The figures, from January of this year, also show that there are now two million personal credit cards in circulation, down 102,000 in a year.
It is believed the changes have come about thanks to the recession, as families with young children are €3,000 worse off this year because of December's Budget. The changes in income tax alone are sucking almost €1,250 out of a household on the average family income of €55,000.
On top of this, families are also down heavily from cuts in child benefit. If a family has three children who still get child benefit, the hit will come to €480 a year from the reductions in this benefit.
Personal finance experts said yesterday that one of the main ways in which families were dealing with another tough financial year was by cutting back on spending on credit cards and paying off existing card debt in bigger chunks.
Some eight out of 10 people owe money on cards, recent surveys have shows. And almost 100,000 people are three months or more in arrears on their payments on unsecured debts such as credit cards.
Consumers are so cash-strapped that €1 in every €10 owned on credit cards is not being paid back, according to banking research firm Lafferty Group. The number unable to repay their credit card debt is soaring.
The market here is dominated by AIB, Bank of Ireland, MBNA and Ulster Bank, with MBNA charging the highest interest rate for purchases at 21pc. High rates are also charged by EBS, One Direct and Tesco Personal Finance.
AIB's Click card and Bank of Ireland's Clear card have rates of around 13pc, the lowest for purchases.
Difficulties with card debt and the refusal of card companies to accept applications for new cards, or transfers from one card account to another, have led to a surge in the use of pre-paid cards.
Six out of 10 credit card applications are now being refused and some existing card holders are having spending limits reduced.