Thousands cut up their credit cards in effort to fight debt
THOUSANDS of people have been cutting up their credit cards each month, bringing their collective debt to a six-year low.
Over the past year 118,000 credit-card accounts have been closed, with a total of 1.9 million now in use. This is down from a high of 2.22 million cards in December 2008.
Almost €1bn was paid off card balances by consumers and businesses last month as card holders battle to whittle down a collective debt of €2.7bn.
The overall amount owed on personal credit cards is the lowest it has been since September 2005 -- €2.6bn -- new figures from the Central Bank show.
The figures also show that lending to consumers continued to fall last month although there was a slight pick-up in some loans to businesses.
But it is with credit cards where the most extreme efforts are being made to eat away at the debt. Consumers have reduced the overall amount owed on credit cards for 19 months in a row.
Although €753m was spent by individuals on credit cards in November, close to €800m was paid off, with another €150m paid off business cards.
Many consumers are understood to have gone from having multiple cards to just one. Others have switched to using debit cards only.
Credit cards have interest rates as high as 23pc on purchases, with rates of up to 21pc for borrowing cash from a credit-card account.
It has become increasingly difficult to get approval to open a credit-card account, with estimates that up to six out of 10 applications are being turned down at the moment.
The Central Bank figures also show a continuing fall in mortgage lending and other loans to households.
Loans to households were down 4.1pc last month compared with November of last year.
The overall amount owed by households fell by €363bn to €111bn.
Mortgages accounted for the largest element of the fall in lending to households. As older mortgages mature and are finally paid off, there are few new ones taking their place.
This meant that mortgage lending was down 2.7pc in November to €80.7bn, almost €18bn lower than it was in July this year.
Lending to business was up by €39m although it is still 1.5pc down compared with this time last year.