The Times of London reports today that nearly half of all shoppers seeking new credit cards are being refused, as a money squeeze begins to hit ordinary borrowers in the UK. Moreover "there have been 125 separate fee and rate increases over the past two months".
The Times cites Peter Brooker, a director at Experian, the credit reference agency, who is quoted: “Quite rightly, lenders are being more discerning about who they lend to and whether they can afford it. It was happening even before the credit crunch, as interest rate rises meant that people’s finances were tightening. We have noticed lenders keeping a closer eye on borrowers before it gets too late.”
The TImes also cites Shona Dobbie, head of Alliance Trust Research Centre, the investment group, who is quoted, “UK households have been too short-sighted and have lost track of financial reality . . . consumers remain reluctant, in the face of growing evidence, to pull back from their elongated spending binge.
Many debtors are turning to their families for loans. The amount owed by Britons to their families now stands at £25 billion – 82 per cent more than they owed in 1997, according to Skipton Building Society.
Chris Tapp, director of Credit Action, the debt charity, said: "We might need to see a move away from people bouncing between 0 per cent credit card deals and starting to try to live within their means without relying on cheap credit."
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While the article is specific to UK consumers, the principles are the same in the United States which is facing its own crisis.
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