Brokers Ireland advises consumers on rising credit card debt costs

Commenting on the Central Bank Credit and Debit Card Statistics for November 2020, Brokers Ireland noted that €595 million was spent on e-commence transactions in the month, a figure it predicts will have substantially increased in December, although figures are not yet available, and advised of the very high cost of such credit if bills are not paid on time.

Rachel McGovern, Director of Financial Services at the organisation which represents 1,225 Broker firms, said credit card debt is one of the most expensive forms of debt available.

“It is penalising when credit card bills are not paid on time, and that is an issue for many now especially with the strain of the pandemic. Some who are unemployed may only be able to afford to make the minimum payments and could end up with a large credit card bill.

“We would advise consumers to be alert to the very high rates of interest charged on such credit, and to the better options available to them.

“Typically interest rates can range from around 14pc to almost 23pc, as opposed to 9pc to 11pc for small loans. If you are not in a position to pay your credit card bill on time you could be paying twice as much as you could otherwise pay,” Ms McGovern stated.

Commenting on the Money and Banking Statistics for November, also published today by the Central Bank, Ms McGovern said with lodgements exceeding withdrawals by €13.4 billion on an annual basis, the highest annual increase in deposits since the series began, consumers also need to consider the best options for their savings.

“While it’s good practice to have savings upon which to call in the event of an emergency, it is unwise to leave large amounts of your savings in low yielding deposit accounts for long periods of time, as Irish savers have a propensity to do.

“Interest on savings is now almost non-existent, and with inflation savings could begin to be eroded. Even where the savings rate exceeds inflation, interest on savings is subject to DIRT (Deposit Interest Retention Tax ) at 33pc currently,” she continued.

She said while individual consumer needs will differ people do need to shop around for best value.

“Many no doubt are saving for a deposit for their first home. Others are, understandably, feeling uncertain in the current environment with Covid-19. However, there are many better value savings and investment options, better than leaving money in short-term deposit accounts.

“Some may need to consider if they might be better paying off some debts where they have them, particularly on credit cards and overdrafts where interest rates are excessive,” Ms McGovern added.

She advised people to think about what it is they want for the future “and take financial advice that will be tailored to your individual needs.”

 

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