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UK government help for credit card holders could backfire

This week will see the UK government publish a report on the UK credit cards and store card system and various practices used by the industry to increase profitability. One of the major elements under review will be the "minimum monthly payments" demanded by credit card companies which have fallen from around 5% to between 2% and 3% over the last few years. The UK government believes the minimum payment should be increased back to the 5% level which would ensure credit card customers are paying back more and more of their debt each month.

However, while the idea may have credence and ultimately assist credit card customers in the longer term there are concerns that many customers are already struggling to repay their debt and an increase of 100% in monthly repayment demands could cause significant problems. Yet again, the UK government has entered a financial market, trying to assist UK consumers, but as we saw in the overdraft charges saga, UK banks will ultimately increase charges elsewhere to make up for any lost profits.

There is no doubt that credit card debt has been building constantly over the last decade and more and more UK credit card holders are in serious financial trouble. However, surely now is not the time to squeeze them even harder!

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