Are credit cards dangerous?

A report by the Bank of England confirmed that £3.5 billion was written off by UK banks and building societies between April and June 2010 with a massive £2.1 billion of this write-off directly associated with credit card debt. So are credit cards dangerous?

There is no doubt that through the 1990s and into the new millennium there was a massive explosion in the use of credit cards in the UK and as such credit card debt spiralled out of control. In the boom times, with property prices moving higher and employment plentiful across the UK, few people had difficulties repaying their credit card debts, or at least paying off the interest on a monthly basis. However, as underlying debt figures continued to grow we saw interest payments continue to spiral higher and when the credit crunch hit home and interest rates moved higher, the problems began.

When you consider that credit cards interest rates at the moment are commonly upwards of 20% it is only now becoming clear what a massive burden this has placed upon many people. Even though we have seen credit card debt stabilise in the short term there is a concern that some people will return to credit card debt once the economy is back on an even keel.

Used correctly credit cards are a very useful method of payment, but used incorrectly they can become something of a millstone around your neck.