Increase in overdrafts

In the difficult financial times that the country is going through, more and more people are being forced to rely on their overdraft to make ends meet – even if they had never used this facility in the past.

At the same time, many banks are increasing interest rate charged when people are overdrawn. For example, the Nationwide interest rate now stands at 18.9% – double what it was a year ago.

Barclay’s have announced similar increases, from 9.6% to 12.9%.

As banks are trying to recoup losses, more people could be forced to seek debt consolidation. This could help them reduce their monthly outgoings and reduce charges.

Perhaps most disturbing, many people do not relise how much the over draft is costing them. According to the Office of National Statistics 66% did not know they would be charged when overdrawn.

Quite simply, people need to make sure they become more aware of the charges associated with their account.

Rise in consumer confidence

Confidence among UK consumers is beginning to rise, which could mean those much spoke of “green shoots” may finally be making an appearance.

However, experts are still predicting there could be further economic decline on the horizon. Subsequently, many people will still need to seek debt management to help them make ends meet.

Of course, it is encouraging to see Nationwide Consumer Confidence Index rise to 53, compared to 51 in April.

This is the highest rating since November 2008.

The official figures show that the UK economy shrank by 1.9 per cent in the first quarter of 2009, supporting the comments made by Martin Gahbauer, chief economist at the Nationwide. He said: “While some reports suggest tentative signs of a slowing in the pace of economic decline, it is important to remember that a number of sectors are continuing to contract and any recovery is likely to be sluggish.

“It is likely that confidence will remain fragile.”

The budget

Before the budget, it was widely predicted it would reveal the depth of debt the UK was looking at.

Even so, the £175billion national debt seems like a huge amount, some £15billion more than the highest prediction I saw before the budget.

The budget aims to get Britain through the worst recession since World War 2, so it was expected to include some tax rises and spending cuts. However, many saw the introduction of a new 50% tax rate as tearing up a manifesto pledge. To put it in context, Chancellor Alistair Darling’s pre budget report suggested the top rate would rise to 45%.

The Confederation of British Industry‘s reception was cool. They said the budget did not set out a “credible and rigorous ” path to recovery.

The BBC budget calculator gives a rough guide on how individuals will be affected by the budget.

Paying with plastic

Now I know just as well as everyone else that the credit card should only be used for emergencies.

But with the end of the sales approaching, and pay day still far away, it’s difficult not to flash the plastic for those shoes you’ve always wanted. And with Valentine’s day almost upon us, the temptation to use the credit card to treat your loved one must be hard to resist, isn’t that right men?

Unfortunately, it’s easy to allow credit card spending to get out of control. In fact, a survey has shown that 33% of people use their credit card for everyday spending, like food and bills.

The Post Office survey isn’t the most reassuring reading I’ve ever seen, especially at a time people should be tightening their belts and being more financially responsible.
Using credit cards for everyday costs can lead to increased debt. If you use plastic for daily costs, you could be on the way to long-term financial trouble.