Credit cards relied on in times of income instability

By UK CreditCards.com

Consumers facing sudden changes in their incomes often depend on credit cards, new analysis suggested.

Chris Tapp, director of financial charity Credit Action, said that the cards are used to "smooth out peaks and troughs" in personal income, which can be caused by life events such as being made redundant. He added that many Britons would continue to be dependent on credit card borrowing in future.

Evidence from the Bank of England suggests that the credit card sector is bearing up well, despite the pressures of the financial crisis and economic downturn.

Figures for September 2009 from the institution suggested that overall lending on the cards increased by £79bn.

Mr Tapp said: "We are not seeing significant amounts of growth at all when it comes to credit card lending, but it is performing slightly better than other types of consumer credit."

Unemployment has been rising in the UK throughout 2009. It hit a new 14-year high of almost 2.5m according to latest official figures from the government.

BIS unveils major credit card proposals

By UK CreditCards.com

The Department for Business, Innovation and Skills (BIS) has unveiled new plans to reform the UK credit card sector.

Restrictions on APR increases for customers with existing debts and bigger mandatory monthly repayments could both result from the adoption of the proposals. BIS said that the "order of payments" imposed by credit card providers could also change. This would see payments made by customers prioritised towards existing high-interest debts held on card balances. Currently, firms can pay off lower-interest debts first, meaning that the cardholder has more debt to repay over the long-term.

The BIS plans are now out for consultation, meaning that no concrete changes will be imposed immediately.

Responding to the news, The UK Cards Association said that it would be "reviewing the evidence" of the possible future impact of the changes.

"These proposals risk disadvantaging more customers than they protect," the group's chair Melanie Johnson said. However, the plans were welcomed by Consumer Focus, a customer advocacy group.

Spokeswoman Linda Weatherhead commented: "When every penny counts, these proposals are a very welcome step towards helping consumers get a fair deal."