Although the typical British family managed to reduce their unsecured debts by some £355 in 2011 – making the last 12 months the third consecutive year that net unsecured household borrowing has gone down – UK households remain among the most indebted in the world.

The PwC report said that while the average family is likely to continue to pay down their debts to the tune of around £400 this year, there are concerns that some age groups may have trouble maintaining a reduction in their borrowing. A quarter of the 25-34 year-old age group admitted to needing to use credit to fund essential purchases in the last year.

There are also concerns that a fall in real wages will limit people’s ability to pay off the money they owe. A separate report has forecast that businesses are planning pay rises averaging just 1.1% this year.

If consumers continue to pay down their outstanding unsecured debt at this rate, it will take them nearly twenty years to clear their balances.

Total household borrowing remained relatively stable last year at £1.45 trillion. However, outstanding unsecured credit declined, down £9.2 billion on 2010 to £206.6 billion. PwC said this trend is likely to continue with outstanding unsecured balances being reduced under the £200 billion mark by 2013.

Simon Westcott, director in PwC’s financial services practice commented: “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.”

“In addition to this, our credit confidence survey has shown that there is a growing reluctance to borrow in the future and a marked deterioration in confidence about meeting repayments, particularly among 18 to 24 year olds consumers where less than half of those surveyed believing they will be able to repay their debts”.

Borrowing on credit cards declined by 5% in 2011, as consumers appeared to turn away from this form of unsecured borrowing in favour of other payments methods. Although the average credit card balance stood at £1,000 last year, increasing numbers of people were using other ways to pay for goods and services. The use of debit cards increased by 10% in 2011, and is now more widespread than cash payments for the first time ever.

Mr Westcott commented: “Forty-five 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.”

“The longer term trend suggests that numbers will continue to decline, with the younger generation showing a preference for debit cards and emerging digital alternatives such as mobile payments. This generation seems unlikely to switch to increased credit card usage in later life, as perhaps they would have done in the past, suggesting that debit cards, mobile payments and other innovations will force the credit card into an ever decreasing market.”

The founder of Money Saving Expert joined BBC Radio 5 Live’s Shelagh Fogarty last Wednesday, as they reviewed the best money saving tips for 2012. Martin tipped the Capital One Classic card as a good means of building up your credit rating whilst avoiding pricey interest rates. Martin Lewis admitted that he had ‘not seen an offer like this before,’ and suggested the card could, ‘save you hundreds or thousands of pounds in bank charges and enable you to get back on your feet.’

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34.9% APR Representative (Variable)

Representative Example:

Assuming a credit limit of £1,200 and an interest rate on purchases of 34.94% p.a. variable, you will receive a 34.9% APR representative variable.

A YouGov poll for the banking technology firm Intelligent Environments found that 31% of the 2,015 adults questioned would take out some form of additional debt to pay for their spending over the holidays. Eleven percent of respondents said they would lose track of how much they spend over the coming weeks.

Some 58% of those who said they planned to fund part of their Christmas budget with credit said they will spend more on credit cards, while 39% will go overdrawn as a result of buying gifts and socialising.

The survey found those aged between 25 and 34 struggled the most with money, with 64% of this age group facing debts or arrears.

Jerry Mulle, sales and marketing director at Intelligent Environments, said: “Christmas is typically a cash-strapped time of the year but as harsher economic conditions start to bite the number of people falling into debt or behind on their payments looks set to rise.

“Financial institutions therefore have a duty to help customers better manage their finances and make it easier for them to repay their debts.”

The survey was published after Reg Bailey, David Cameron’s “childhood tsar”, advised parents to cut back on the amount they spend on their children and pay off their debts instead.

Mr Bailey, chief executive of Christian charity the Mothers’ Union, said: “This is a stressful time of the year. There’s pressure to buy expensive things.

“Children admit they pester their parents. But it’s terribly sad that we end up leaving parents feeling utterly guilty after Christmas, having desperately tried to make ends meet.”

Fraud detection software and updated the rollout of chip-and-pin systems abroad helped push the amount lost to card fraud in the first half of this year to £170 million, the lowest figure since 2000 and 9% down on the same period of 2010.

The data suggests that frustrated fraudsters are resorting to low-tech methods to scam money out of unsuspecting consumers. Phone banking fraud increased by 48% to £8.6 million over the past year, while the amount of money spent on lost or stolen cards rose by 20% to £26 million.

Police say more con-artists have been grabbing cards in shops or at cash machines without the owners noticing, or tricking them into revealing their PIN.

Cheque fraud losses increased from £14 million in the first half of 2010 to £16.4 million during the same period in 2011.

Despite the progress, scammers have not completely abandoned high-tech fraud methods. The number of phishing websites which try to trick people into inputting their financial details has grown by five times over the past five years. In the six months to June 2011, more than 37,000 phishing sites were detected.

DCI Paul Barnard, head of the Dedicated Cheque and Plastic Crime Unit (DCPCU), said: “Losses are appreciably lower than they were a few years ago and everyone involved in tackling fraud has reason to be encouraged by this – and that includes bank customers who, as their own front-line of defence, have certainly played their part too.”

“However, there has been an increase in old fashioned scams – criminals using distraction techniques and social engineering methods to get hold of people’s cards or phone banking details. We are urging everyone to be on their guard. Your bank or the police will never cold call you or email you and ask you for your login details, cards or PINs. If anyone does, they are probably a criminal, so hang up the phone or delete the email.”

A number of new mobile e-money systems are due to launch in the UK over the coming months, joining relatively established services such as PayPal and Google Checkout, but complaints to the Financial Ombudsman Service (FOS) about them have been rising over the past few years.

Among the most common causes for concern among consumers is poor dispute resolution and e-money providers freezing customers’ accounts for up to 180 days, according to the FOS.

The ombudsman said consumers are currently losing seven out of every 10 e-money complaints it receives, compared with just half of more traditional disputes.

Emma Parker, a spokesman for the FOS, said: “We are not saying e-money is a bad thing. It can be very convenient. But we are seeing a steady stream of complaints, because people do not always understand what they are getting involved with. We fear this number could explode when the market opens up to the mobile companies later this year.”

Addressing the concerns raised, Rob Skinner of PayPal said: “We are dealing with buyers and sellers and have a duty of care to both. We are also dealing with people who have never run a business before, but are trading on the internet.

“If we see a large amount of cash suddenly going into an account, we are allowed, by our terms and conditions, to hold onto that, to make sure the customers are satisfied at the other end. In the case of theatre tickets, for example, you could have people selling tickets who didn’t have any to sell, but that might not emerge until closer to the date.”

“Anyone who buys something via PayPal has 45 days to make a complaint. If the complaint is justified we will reverse the payment.”

Neil Aitken, a spokesman for the Payments Council, said: “The consumer protections you are used to, such as money-back credit card guarantees, won’t necessarily apply.”

The BBA’s July report on high street lending found that unsecured lending contracted by 1.1% over the course of the last 12 months, while personal deposits rose by 3.8%.

Outstanding debt on consumer overdrafts and personal loans stood at £52 billion – the lowest level recorded for ten years – as borrowers looked to pay down what they owe as opposed to borrowing more money.

Banks reported gross mortgage lending of £7.6 billion last month, some 8% lower than the £8.3 billion of lending advanced in July 2010 but largely flat compared to June.

In volume terms, the number of mortgage approvals was up 4% in July to 74,950, while remortgages increased by 7% to 26,043.

David Dooks, BBA statistics director, said: “The high street banks have provided almost three-quarters of all new mortgage lending during the last two years when the mortgage market has been very subdued.”

“Overall companies’ appetite for finance remains low, reflecting business decisions in difficult trading conditions – new finance made available to one company is simply being offset by debt repayment from another.”

“Demand for borrowing from both households and companies continue to be weak reflecting the slow growth in the economy.”

The OFT recommended that the government take steps to ban traders from charging customers more than it costs them to process payments after a super-complaint from the consumer group Which?.

The two airlines plan to introduce a flat fee of £4.50 for all card payments from 2 November despite the watchdog’s ruling.

Executive director of Which?, Richard Lloyd, said: “It’s unbelievable that two airlines have introduced these card fees just weeks after the OFT agreed with us that they are unfair and misleading.

“Just one simple change to the Payment Services Directive would put an end to debit card surcharges for good. The Treasury must act quickly to do this before other airlines and businesses jump on the bandwagon and start charging these excessive fees.”

Which? say it costs a retailer no more 20p to process a debit card and no more than 2% of the transaction value to process a payment made by credit card. The OFT said in June that these surcharges were misleading and detrimental to consumers.

A spokesperson for Lufthansa told the Travelmole website that it incurs considerable costs processing card payments that it has to pass onto its customers. It also claimed that its booking system is unable to distinguish between debit and credit cards, which why it has introduced a flat fee.

The lender has announced a record-breaking 24 month interest-free offer to borrowers who transfer a balance to its new platinum card.

Other lenders, apparently oblivious to growing concern over debt problems in the euro zone and the US, have been aggressively fighting each other to grab a greater share of the increasingly competitive credit card market for months now.

The move comes in response to the launch of a 20 month balance transfer offer from the Halifax which matched Barclaycard’s previous best deal, beating Virgin Money and MBNA by one month.

Barclaycard, the UK’s biggest credit card issuer, also reduced it balance transfer handling fee from 3.2% to 2.8% for all customers who take up the offer within 60 days of taking the card out. This is still some way behind the fees charged by Virgin Money MasterCard and MBNA Platinum Visa, at 2.49% and 2.5% respectively.

A spokesperson for Barclaycard said: “As a successful and growing business we are able to offer our customers the most competitive deals and this has remained the same over the past few years.

“Balance transfer deals across the market have been getting progressively longer over recent years and as a leading player in the market we want to ensure we’re at the forefront of offering our customers the best deals.”

A customer with a balance of £3,000 paying the typical 18.9% credit card interest rate would save £935 over the 24 month period.

The card reverts to a standard variable rate of 17.9% at the end of the interest free period and offers a three month interest free period on purchases.

Michelle Slade, a spokeswoman for financial research website Moneyfacts.co.uk, said: “In the last few months interest-free balance transfer deals have soared again and this is the longest interest-free period we have seen. Such an aggressive move is quite surprising given that they were already the market leader.

Ms Slade went on to warn that the deal is likely to only be within the reach of those with an exemplary credit record.

Which? credit card expert Bobby Nicholls said: “If you’re paying interest on existing credit card debt, this new card offers a great way to cut your interest repayments and therefore pay off your debt much quicker.

“Although Barclaycard has also reduced the handling fee to 2.8%, if you’re likely to repay your whole balance within 19 months, you’d still be better off with either the Virgin Money MasterCard or the MBNA Platinum Visa.

“If you’re looking for the longest possible balance transfer deal, though, the Barclaycard offer is by far the best deal on the market.”

Some 11 million people have to resort to putting everyday expenses on their flexible friend when the money in their current account runs dry.

Those who have to pull out the plastic to make ends meet tend to do so 21 days after their last payday. Nearly 10% of this group have to fall back on their credit card just 15 days after being paid.

The Welsh are the quickest to fund their essential monthly commitments with debt, pulling out the plastic ten days after being paid. Workers in the east of England mange to hold out the longest, waiting until 27 days after their last pay check before resorting to credit.

Kevin Mountford, head of banking at Moneysupermarket.com said: “With most of the population feeling the pinch at the moment, it’s no surprise to see so many people reliant on credit so early in the month. However, unless you plan this properly and know you’re able to pay off your balance, this can be a dangerous trap to fall into.”

Some 36% of those questioned said they had less money as a consequence of the economic climate and could not afford to lose any to card crime.

Despite this, the worldwide survey found that 9% of Britons still kept their PIN in their wallet or purse with their cards, making it easy for anybody to who stole them to withdraw money or make purchases.

Although nearly one in ten may seem high, UK consumer’s personal security measures compare favourably to those of nationals from other countries around the world. Some 21% of Italians carry their PIN number with them when they are also carrying their cards, a number that rose to 23% in India and 27% in China.

Americans fared slightly better with only 10% carrying both at any one time.

Jasbir Anand, lead solutions consultant at ACI Worldwide, said: “When it comes to fraud, prevention is obviously better than a cure. Financial institutions need to continue to inform consumers about how they can protect themselves against fraud.”

“These findings highlight an opportunity for banks to educate consumers about how cards are generally skimmed in the home country, and then fraudulent transactions are attempted overseas or online,

“Our survey also revealed that consumers are very concerned not only about how fraud can impact them personally, but as a greater society. Globally, 15% of cardholders said their biggest fear about card fraud was their money being used to fund organized crime, compared to just 10% whose main concern was damage to their own individual credit rating.”

The online survey of 4,200 people was conducted by Research Now in December and included respondents from Australia, Brazil, Canada, China, Dubai, France, Germany, India, Italy, Netherlands, Singapore, Sweden, Great Britain and the United States.

Lenders are pocketing some £2.3 billion a year in interest payments that consumers could avoid by moving their debt to another card. This is despite the fact that only 3% of credit card users pay their balance in full every month avoiding any interest payments at all.

Research from Moneysupermarket.com suggests that around 65% of credit card holders have never transferred an outstanding balance to an interest-free card. The website’s poll found that a quarter of respondents either couldn’t be bothered to enquire about transferring a balance or didn’t understand how to.

The survey was published in the same week that two lenders introduced record introductory offers. Borrowers who successfully apply for a Barclaycard Platinum card can take advantage of 0% on balance transfers for 17 months, the longest interest free period the lender has ever offered.

M&S Money launched a card offering 0% interest on purchases for 15 months, also the longest period on record for the firm.

Commentators predict that these offers could prompt other major credit card providers to respond with similar deals as competition returns to the market after banks restricted their lending in the wake of the financial crisis.

Kevin Mountford, head of banking at Moneysupermarket.com, said: “As the nation’s wallets continue to be squeezed by higher living costs, it is crucial consumers look to pay off their debt quickly and efficiently to prevent additional interest from accruing.

“Anyone with an outstanding balance on their card should consider switching to a product offering 0pc interest on balance transfers such as Barclaycard’s Platinum credit card or Nationwide’s new credit card, both offering 17 months interest free.”

He went on to say that 0% offers might not be the best solution for those with poor credit scores: “If you are in this situation and have a debt you need to shift, you need to look at all of your outgoings and try and get a target for paying your debt down. The longer to take to pay off your balance, the more it will cost you in interest.

“Anyone looking to switch cards should always check which card is most suitable for their personal circumstances as different lenders will treat each applicant differently.”

The Post Office Consumer Credit Report found that 11.5 million people were left so hard-up after Christmas that they needed to fall back on credit to cover their day-to-day living expenses. Over 40% of credit card holders used their cards to pay for groceries. Using a credit card to pay for basic purchases is widely considered to be a sign of financial distress by lenders and debt charities.

A tenth of respondents said that they were using their credit card to compensate for the long gap between December and January pay-days, while 11% said that overspending at Christmas had left them unable to make ends meet.

Az Alibhai, Post Office head of credit cards, said: “January has been a tight month for many of us, especially with the long wait until pay day, and we can see that many people are falling back on credit cards to ease the costs of day-to-day living. If the debt is managed sensibly and paid off quickly, this can be very effective. However, if you don’t pay off the bill in full, it can be a pricey way to fund daily purchases.”

Over 50% of people who hold a credit card expected to spend the same on it this year as they did in 2010 but 7% thought they would spend more, a third of whom said they would spend up to an extra £100 a month.

The survey also found that many people own more than one credit card with 20% of men owning three or more.

Just over half of those questioned said that they pay their credit card bill in full each month, with 7% saying it would take them three years or more to clear their debt.

Una Farrell, of the Consumer Credit Counselling Service, said of the research by the Post Office: “This is very worrying as using a credit card for day-to-day living expenses is one of the biggest signs of a debt problem, as it is only repaying the minimum amount each month. Credit cards can be really useful if managed carefully and people need to keep an eye on how they use them and repay credit card debt.”

Orange and Barclaycard are planning to launch the service in the summer. Customers with an enabled smartphone will be able to make purchases of up to £15 by waving their phone in front of a scanner. Barclaycard currently use contactless technology to allow credit card holders to make small purchases without having to submit their PIN number.

Businesses that have contactless technology already installed at their retail outlets include, Cafe Nero, Prêt a Manger, Little Chef and the National Trust. More outlets are expected to sign up for the service once it is live and other mobile networks embrace the technology.

Gerry McQuade, chief development officer for Everything Everywhere, the UK’s biggest mobile phone network which includes Orange and T-mobile, said: “This is the beginning of a revolution in how we pay for things. It’s a cultural shift that is as important as the launch of the personal credit card or cash machines. We’re making something that’s been talked about for many years a reality and, very soon, using your mobile to buy a sandwich, a cinema ticket or, in time, even something bigger like a computer will simply be the norm.”

The ability to pay for purchases by phone is something that consumers have indicated they want according to Jason Rees, director of m-payments at Everything Everywhere.
He said: “Studies show that people are more likely to forget their wallets than their mobile phones. Trials have proved that customers love it, they love the simplicity of having their wallet all in one place and it means there is no more need to carry cash.”

The technology involved is known as Near Field Communication (NFC) which uses short range wireless technology similar to Bluetooth to allow mobile devices to communicate with a scanner. Customers who use the new service will be fully refunded for any fraud that occurs as a result of its use.

Ben Wood, an analyst with research firm CCS Insight, said that NFC technology has the potential to open up a range of new applications: “Payments is going to be the anchor application but you can imagine shops having a NFC sticker which you simply touch with your phone to check yourself into Google or Facebook. Or imagine touching a digital photo frame and being able to transfer a picture. There are going to be some incredibly cool ways to use it.”

The number of homeowners and tenants resorting to credit to keep a roof over their heads has risen by nearly 50% since November 2009. The polling organisation YouGov asked 2,234 people in Britain if they had borrowed money on a credit card to pay their rent or mortgage over the last year. Some 6% said that they had compared to just 4% in 2009 suggesting a national figure of close to two million people.

The charity warn that the rising interest rates and unemployment coupled with an increase in VAT and inflation means that many families are starting the New Year with the very real prospect of losing their homes once they have exhausted the small amounts of expensive credit available to them.

Shelter’s Chief Executive Campbell Robb said: “Our research brings into sharp focus the daily struggle faced by millions of people across the country to keep a roof over their head.

‘This is a totally unsustainable situation and one which we fear could see thousands more families pushed into the spiral of debt, eviction or repossession and ultimately homelessness’

‘It’s vital that every single person using credit cards in this way takes action to get themselves out of debt and seeks urgent advice from organisations like Shelter, to ensure they don’t lose their home.’

A spokesperson for the Council of Mortgage lenders (CML) said that the vast majority of these cases were likely to be related to rent payments rather than mortgages as these are usually paid by direct debit.

A report by the CML published last November said that only a very small proportion of mortgage holders find themselves in a position where they are forced to resort to credit to meet their monthly repayment: “Some 11% have used a credit card to pay their bills at some point. Despite recent sensationalist news headlines, only 2% of mortgagors have ever paid their mortgage on a credit card, with half of these paying off the balance at the end of the month.”

Shelter urges anybody experiencing difficulty meeting their monthly mortgage repayments or rent to contact a free debt advice service like the Consumer Credit Counselling Service or Payplan.

Martin Lewis of MoneySavingExpert.com said: ‘For all but the seriously financially savvy, using credit cards to pay rent or mortgages is a mistake. After all, you’re simply paying off one debt with another and that isn’t any type of solution.

‘If you’re doing it because you can’t afford to pay your housing costs, lumping up the borrowing is never the answer – far better to seek help as soon as possible and start managing the problem.’

‘When it comes to getting help for those in debt crisis, there is a wonderful range of non-profit advisors out there, whose information is based purely on what’s best for you, not on pushing their own profits. I would urge people to seek help from organisations like Shelter – it should stop a few sleepless nights.’

Cardholders of banks including Barclays, Santander and NatWest say they are being put through to a third-party company called Card Protection Plan (CPP) when they call to activate a new card. Radio 4’s Money Box program says that the company then tries to sell customers the cover but has signed some customers up to the scheme without their knowledge or consent.

Peter, an Asda credit card holder from Cumbria, told the program that his call was redirected to CPP when he called to activate a new card expecting to be put through to Asda or Santander who provide the card: “The person I spoke to asked me if I wanted an identity theft protection product and I said no.”

Despite Peter declining the company’s offer, he recently discovered a charge on his statement for £83.99 for the product. Looking back through his records for the previous year in detail, he realised he had also been charged £69.99, putting him some £150 out of pocket for a service did not want and actively declined.
Peter complained to Asda who advised him he would need to talk to CPP directly. The company advised him they would listen back to the call he made to the salesperson and refund his money if he had clearly stated he did not want the insurance.

CCP said it could not find a recording of the call Peter made to activate his card and the salesperson who took the call had since left the company after he wrote a formal letter of complaint asking for evidence that he had explicitly signed up for the cover. It offered to refund both the fees that had been charged to his account. Asda has since asked CPP not to try to sell its ID theft cover to its customers when they call to activate their cards.

Money Box also heard from customers of other high street banks including Santander and NatWest who said they too had been signed up for ID theft insurance from CPP after clearly stating they did not want it.

Shirley Woolham, a divisional director at CPP, told the program mistakes had clearly been made: “We did listen to the calls identified and without question we did make a mistake. We take our customer service activity very seriously.

“We ask the customer explicitly if they would like to entertain a conversation about ID theft. If they say no, we do not proceed with the call.”

Halifax Clarity credit card, the new, no-fees credit card which doesn’t charge any fees for using the card abroad, offers existing qualifying current account customers the chance to earn a £5 monthly reward by spending at least £300 a month on their credit card.

Halifax Reward current account already offers customers a £5 monthly reward for depositing £1,000 a month into the account, which if translated into a credit interest rate would be the most generous long term rate from a current account for those with an average balance of up to £1,500.

The Clarity credit card offers an additional reward for qualifying Halifax current account holders. They will receive a £5 cash back offer when they spend over £300 in any one month. This additional reward means that existing Halifax Reward current account customers who pay £1,000 a month into their current account could now earn up to £120 a year; with a £5 monthly reward on their current account and £5 with the Clarity card.

Ian Hallett, Halifax Director Personal Current Accounts says:

“Customers looking for a bank account with long term rewards need look no further. With the Halifax Reward current account they can earn up to £60 each year. What’s more if they take up the offer on the Clarity credit card they can double those rewards to £120. Both products individually offer brilliant value, but taken together they represent a truly fantastic package for our customers”.

The annual interest rate on the Barclaycard Simplicity card has been reduced to 6.8%. The new rate – one of the lowest available rates on any card in the UK – applies to both purchases and balance transfers.

In addition to this, Barclays has also increased the balance transfer deal available on the Barclaycard Platinum. Barclaycard Platinum now offers new customers fifteen months at 0%, with a handling charge of 2.9%, 0% interest on purchases for the first three months, and a typical APR of 16.9%.

Both cards have a range of associated benefits, including Barclaycard Freedom, mybarclaycard, and Barclaycard Unwind.

Barclaycard Freedom allows customers to earn and redeem Reward Money in pounds and pence in thousands of retailers across the UK without the need to carry additional cards or vouchers. Customers will also enjoy the flexibility of contactless technology: payments of £15 and under can be made by simply holding the card over the contactless reader, all backed up by Barclaycard’s advanced security and fraud prevention measures.

mybarclaycard is the next generation of online card and banking services, offering customers new ways to interpret and manage their spending. mybarclaycard enables customers to personalise their pages, and offers visual representations of spend to make card management easier.

Barclaycard Unwind offers Barclaycard holders exclusive discounts and pre-sale access to gig tickets as well as private sessions with top UK artists, competitions and up to the minute music news. As part of Barclaycard Unwind, Barclaycard is the title sponsor of the Mercury Music Prize and the Wireless festival, and has recently announced a partnership with Wembley Arena, which is now to be known as ‘Wembley Arena, a Barclaycard Unwind Venue’.

Research by moneysupermarket.com has found that 63% of balance transfer card users have used their card to make a purchase, with almost a third (29%) admitting that they never intended to make a purchase in the first place.

Making a purchase of just £50 on a card with an existing balance transfer of £2,500 could cost up to £106 in interest over 12 months, due to the higher APR rate for purchase transactions. Due to the repayment methodology on the majority of credit cards, anyone making this mistake would have to pay off the entire balance transfer balance before they could repay the purchase balance. This is due to a repayment rules, due to be outlawed, known as ‘negative payment hierarchy’ whereby the balance with the lowest interest rates are pay off first.

Kevin Mountford, Head of Banking, moneysupermarket.com, said:

“Despite this issue receiving a lot of publicity over the last few years, it is still worrying that many credit cardholders still make the crucial error on their cards of using them for both balance transfers and purchases. Although many cards advertise zero per cent rates for balance transfers and purchases, the majority of cards only offer short term deals for purchases. Once this deal ends, the outstanding balance is protected and will accrue interest at a much higher APR, typically over 18 per cent.

“The easiest way to avoid this mistake is two use two different cards, one for balance transfers and one for purchases, however in a market where credit is difficult to come by, this is easier said than done. Alternatively you could take out a credit card which offers equal promotional deals on balance transfers and purchases, such as the Virgin Credit Card 12/12 or go for a card such as the Nationwide Credit Card, which operates a positive payment hierarchy whereby the most expensive debt is paid off first. As of September 1st, MBNA cards, which represent a sizeable chunk of the market, will also pay off more expensive debts first.

“If you have made this crucial mistake of using your card for both, then you need to look to balance transfer away to a new card or aim to pay down your balance as quickly as possible.”

Nearly five million Brits rely on credit cards to pay their household bills according to new research from moneysupermarket.com. Furthermore, 2.5 million people also use their credit card(s) to withdraw money – potentially costing them around £90 million a year in total.

The research found that, whilst over half of Brits (55%) use their credit card(s) to fund items such as TVs and DVD players, spenders are also regularly using their plastic to pay for other everyday transactions such as grocery shopping (43%) and buying petrol (38%).

But a further 7% withdraw cash on their credit cards, potentially costing them a combined £90 million in fees annually. 2% of respondents use their cards for gambling, which most credit card providers treat as a cash transactions.

Kevin Mountford, Head of Banking, moneysupermarket.com, said:

“Used responsibly, credit cards can be an integral part of household budgeting but it’s alarming to see so many people using their cards to pay for what should be everyday spending. If you are using a card in this way, and not paying off the full balance each month, then you really do need to review your circumstances, as this is the first sign of financial difficulty.

“Sometimes a credit card can be a convenient way to pay for everyday items, but a rule of thumb is to finance a product over its useful lifespan. Funding a large purchase such as a TV over the length of an interest free period makes sense, however if you are paying for your weekly shop over several months, this is a real no-no. Those consumers who are turning to credit cards to fund basic household bills on a regular basis should be hearing alarm bells, as this habit needs to be avoided wherever possible – it’s really a case of robbing Peter to pay Paul.

“Taking out cash on your credit card can be an expensive business, with most cash transaction APRs well over 20 per cent. With the majority of cards your repayments will not clear this debt until debts on balance transfers and purchases have been fully repaid – as the cheapest debts get paid off first, this means you could be paying way over 20 per cent interest for some time.

“It’s no bad thing to use credit cards to help manage your outgoings occasionally but over the long-term, consumers need to be careful that they don’t fall into this debt trap. Many consumers will fund all their days to day spending on credit cards in order to maximise the rewards on offer on the card, but to benefit from this you need to pay off the full balance each month otherwise the interest you will pay outweighs any gains.”

And with most women’s handbags containing items such as mobile phones, house and car keys, cash and credit cards, and perfume, the true value of an average handbag could actually be closer to £1,800.

Churchill’s data also shows that one in five women (20%) have been the victim of a bag-snatcher, with 5% of those having had their bag stolen in the past year alone.

The most common locations that handbags are stolen from include: the pub (14%), work (12%), shops (12%), clubs (12%), and cars (8%).

Claire Foster, Churchill, said:

“Many women save up for months to be able to buy the latest Mulberry or Marc Jacobs bag, but it’s all too easy to take our eye off our bag when we’re out in a bar or on the dance floor. Remembering to keep an eye out for thieves is crucial, as it could end up costing a small fortune to replace your bag and possessions, not to mention the stress factor.”

Churchill have offered the following advice to ensure that your handbag remains safe: keep your bag close to you and fastened securely, use handbag clips in public places, use secure lockers to store your handbag when at the gym or the pool, only carry what you need, never leave your bag unattended, don’t carry personal documents around in your bag as it makes identity fraud easier if your bag is stolen, and ensure that you have the right insurance in place.