Credit card spending is going down

People are spending a lot less on their 0% credit cards this year despite it being the run up to Christmas, a time when debts traditionally rise as households increase spending on food, gifts and festivities.

It seems that as the recession has squeezed people's finances, they have become more restrained about the amount of debt they accrue, particularly with spending that some would consider unnecessary, as they struggle to stretch their income to cover food and bills.

Andrew Hagger, spokesman for moneynet.co.uk, confirmed this outlook.

"There has been less spending on credit cards than in previous years, so I think people are realising that they have to cut back in order to pay for their essentials because the cost of food, energy and petrol have all gone up, so they have to cut down on borrowing," he explained.

However, he said that people are working hard to pay off debt and build up savings so this may also explain the resistance to putting Christmas spending on 0% credit cards.

Mr Hagger said that choosing to pay off debts before contributing to savings was a sensible way to do things.

"In most cases, that is a sensible thing to do because your debts will be charged at a much higher rate than any interest you will earn on a savings account. I can see why people do that, it does make sense," he explained.

However, Defacto claimed that people can benefit from using 0% credit cards at Christmas if they pay them off in full when the bill arrives.

David Black, Defaqto's insight analyst for banking, said that the right credit card can help people earn rewards while they spend, as some offer points while others give cash-back or airmiles.

He added the key is to do your research and pick a credit card with the rewards that are most beneficial personally.

Moneyextra.com recommends you take independent financial advice before acting on any article

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2011-11-03 13:37:40 © Moneyextra.com