It seems that many consumers may have switching from spending on credit card that can sometimes come with high rates of interest to spending on payday loans, which almost always come with crippling APRs. A recent report has indicated that people in the UK are spending less on their credit cards, which is good news in terms of reducing the credit card debt mountain. However, the bad news is that many people are turning to costly payday loans, which come with crippling APRs and are leaving some people struggling in a never ending circle of debt.
Some people are said to be turning to payday loans rather than credit cards because they see these loans as a faster solution to their money problems because they can get their hands on the cash so much quicker than having to apply for a credit card. On top of this, there is no need for those with damaged credit to worry as long as they are working, as most of the lenders do not carry out a credit check.
The report states that a rising number of people have been moving away from credit cards, which have been described as going through a ‘midlife crisis’. With so many payday lenders advertising their loans all over the media, it is little wonder that so many people are now throwing caution to the wind and choosing one of these loans, despite the high APRs.
One official said: “UK consumers are among the most indebted in the world, with the average UK household still saddled with nearly £8,000 of unsecured debt. Although the UK Government’s austerity drive appears to be hitting home, with households paying off an average of £355 worth of their debt in 2011, three years of austerity by UK consumers has only made a small dent in the total levels of borrowing.”
He added: “45 years since it was first introduced, the credit card is suffering a midlife crisis. Consumers discarded nearly one million cards in 2011, taking the number of credit cards in circulation down to levels not seen for almost a decade.”