Car Being Reposessed for Credit Card Debt

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					Strictly embargoed until Wednesday 22nd July 2009


          CONSUMERS CLING ON TO 38 MILLION[1] UNUSED CREDIT CARDS
                 The question remains, to close or not to close...


•   16.3 million[1] consumers have an average of 2.3[1] credit cards they no longer use
•   Of those with unused credit cards, almost one in ten consumers (8%) have as
    many as four and 7% have between five and six
•   In total, these consumers have 38 million[1] credit cards that they don’t use, with a
    total credit limit of £200 billion[3]
•   Last year 7.8 million[2] balance tranfers were carried out – with just 46% of people
    closing card accounts they no longer use this will just add to a growing problem
•   Almost 10 million[4] consumers try to recession-proof themselves by not using
    their credit cards, a further 1.8 million[4] cut them up altogether to avoid temptation
•   With 3.32 million[5] credit card applications rejected in the last year and 1.2
    million[5] people turned down for increased credit limits, consumers seem loathe to
    close these accounts and let the lifelines go


As unemployment hits 2.38 million and credit card rejections reach 3.32 million[5] in the past
12 months, it seems 16.3 million[1] consumers are clinging onto at least two additional credit
card accounts that they no longer use, in what seems to be a desperate bid to keep a
financial safety net. New research from uSwitch.com reveals that these consumers are
sitting on a total of 38 million[3] unused credit cards with a total credit limit of £200 billion[3].
1.8 million[4] consumers feel they have done the safest thing by cutting up their credit cards
in order to protect themselves from overspending while 10 million[4] claim they have just
stopped using them.


Keeping these accounts open may seem like the most sensible thing to do in the current
climate as it provides an average pot of £11,969[2] that can be tapped into at any time. With
3,178[6] people being made redundant every day, a property reposessed every 10 minutes[6]
and 331[6] declared insolvent or bankrupt every day this is hardly surprising. However, this
practice could have negative connotations, particulary on credit scores as providers also
examine the amount of credit available alongside the ability to repay debt on time.


As a nation we are notoriously bad at keeping an eye on our credit reports. Although the
recession has created more consumer interest in these reports, our research shows that
54%[7] of consumers have never looked at their credit report. Alarmingly, of those who did
check their credit record in the last 12 months, 13%[7] found mistakes such as payments
listed incorrectly as ‘missed’ and inaccurate credit limits.


Along with the negative impact on your credit score, fraud is also a consideration. Every
recession is typically greeted with a surge in fraud and this is no exception. Last year alone,
fraudsters enjoyed a spending spree of £54.1 million[8] on lost and stolen credit cards. They
also cashed in to the tune of £10.2 million[8] by using cards intercepted in the post. This is
the type of activity cosumers may not even be aware of if one of the 38 million[1] dormant
credit card accounts are used. These dormant accounts are easy pickings for fraudster as, in
many cases, they could well be registered to an old address and it could take several
months, if not years, to identify the abuse.


Louise Bond, personal finance expert at uSwitch.com, comments: “Overall it seems
people are bombarded with conflicting opinions as to whether or not they should close credit
card accounts that they no longer use. In times of such financial turbulence, it’s hardly
surprising that people don’t want to let go of what they consider to be a financial lifeline.
There are several issues to consider as credit checks are influenced by the amount of credit
available to spend. So in effect, this lifeline could become a financial bottle neck to the next
best deal.


“Hoarding as many as six un-used credit card accounts is excessive. It is a problem for both
the credit card industry and individuals. In recent years, we have seen providers close down
these accounts or, in some cases, introduce a fee for consumers that don’t use their credit
cards. This may seem harsh but these dormant accounts do cost providers money to
maintain. Whilst we’re not telling consumers to rush out and close down every account they
do not use, if you do have as many as six a little spring clean wouldn’t go amiss.”


Bond’s credit card tips:
•   Check     your    credit   record    before     making     any    applications    for   credit    at
    http://www.uswitch.com/credit-reports.
•   The electoral register is key, to check you must contact your local electoral registration office at
    www.electoralcommission.org.uk.
•   If your credit report looks inaccurate you can correct any mistakes. To do this you can add a
    Notice of Correction which is a 200 word statement which you can add to your file to explain any
    entries in your credit report.
•   If you are rejected for your next credit card, do not keep applying for more cards before
    you have checked your credit record. Failed applications for credit will have a negative impact
    on your credit score.
•   You must also close down any credit card accounts you are not using. The available balance on
    these accounts will be taken into consideration when you are applying for a new card.
•   Missed credit card payments also impact your credit score, the best way to avoid this is to set up
    a monthly direct debit for the minimum payment.
•   Sometimes, the best deals on the market are only available to new cardholders. By cancelling
    existing credit cards, after a time you should become re-eligible to be a ‘new cardholder'.
•   Don't confuse cutting up a credit card with cancelling it. Cutting it up simply stops you using it.
    Instead call up the card company and tell them you want to cancel. If possible request
    confirmation of cancellation in writing, as sometimes they don't action it.
•   Yet, even once you've cancelled a card, it doesn't mean the account is closed. The card company
    will leave it dormant but open for a while in case any payments you've made still need to come
    through. It's worth making a call a few months later to double check it's done and dusted.



                                                   ENDS

An ISDN line is available for radio interviews. For further information please contact:

Tracy North, uSwitch.com 020 7802 2925 / tracynorth@uswitch.com
Lizzi Malley, Lansons Communications, 020 7566 9717/ lizzim@lansons.com

Notes to Editors

Research carried out by Research Now amongst a panel of 1011 credit card holders. Research carried out from
  th   th
12 – 14 June 2009

    1.   Extrapolated figures based on current UK credit card holders 30,200,000 sourced from APACs report
         (UK Plastic Cards 2009).
             •   54% of credit card holders have cards they don’t use but haven’t cancelled. 54% of 30,200,000
                 = 16,308,000
             •   Our research shows that on average, these consumers have 2.3 cards that they don’t actually
                 use.
             •   2.36 x 16,308,000 = 38,486,880.
    2.   APACS figures:
             •   APACs 2008 – average credit limit is £5,204. £5,129 x 2.3 = £11,769.
             •   APACs, UK Plastic cards 2009, in 2008 7.8 million balance transfers were carried out.
    3.   Total number of cards that aren’t being used = 38,486,880:
              •    38,486,880 x £5,204 = £200,285,723,520.


    4.   Extrapolated figures based on current UK credit card holders 30,200,000 sourced from APACs report
         (UK Plastic Cards 2009).
              •    33% of credit card holders have stopped using their cards but keep them for emergencies. 33%
                   of 30,200,000 = 9,966,000.
              •    6% have cut them up to stop themselves from using them. 6% of 30,200,000 = 1,812,000.


    5.   Extrapolated figures based on current UK credit card holders 30,200,000 sourced from APACs report
         (UK Plastic Cards 2009).
              •    11% of credit card holders have had an application for a new card rejected.
              •    11% of 30,200,000 = 3,322,000
              •    4% of credit card holders were turned down for additional credit. 4% of 30,200,000 =
                   1,208,000.
    6.   Credit Action debt facts and figures – June 2009.
    7.   Research referred to in the notes below was conducted online by YouGov Plc in 2008 (sample size
         2,097 adults). All figures are based on uSwitch.com analysis. The figures have been weighted and are
         representative of all GB adults (aged 18+).

         The YouGov research showed;

         •  36% of those surveyed have not checked their credit record in the past 12 months and 42% have
            never checked their record = 78%.
         •  78% of GB adults (38 million source ONS) = 29,640,000.
         •  42% of GB adults = 15,960,000.
         •  36% of GB adults = 13,680,000.
         •  15,960,000 is 54% of 29,640,000. 54% of people have never checked their credit record.
         •  Of those that checked their credit record within the last 12 months, 13% of these found errors.
    8.   APACs fraud figures.




About us:
uSwitch.com is a free, impartial online and telephone-based comparison and switching service, helping consumers
compare prices on gas, electricity, water, heating cover, home telephone, broadband, digital television, mobile phones,
personal finance products and car insurance.

Our aim is to help customers take advantage of the best tariffs and services on offer from every supplier. To aid us in this
task we have developed a comparison calculator, which evaluates a number of factors including price, location, service and
payment method, and advises consumers on the best deal to suit their needs.

The service is also available via fax and post. Fax 020 7233 5933 or write to Customer Services, uSwitch.com, 111
Buckingham Palace Road, London, SW1W 0SR, with your postcode and usage details.
uSwitch.com is not a supplier but acts independently, giving consumers an impartial view of what’s on offer.

				
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