Confused.com, the leading price comparison site, are warning consumers about the dangers of falling into debt as a study they held has indicated that credit cards are easier to get than they were last year, especially for those who are on low incomes or unemployed. At the same time, the charges and fees have risen, which makes this kind of borrowing a lot more expensive.
The study, that did a comparison of the whole of the credit card market in the UK of July 2011 with July of this year, revealed that there are currently about 23 credit cards that will accept those who are unemployed, compared to just 17 in 2011.
The latest employment figures from the Office for National Statistics show the number of unemployed people was 2.56 million in the three months to June 2012, up 51,000 from a year earlier. Meanwhile, the number of people unemployed for over one year was 882,000, up 1,000 from the previous quarter, with the Confused.com study suggesting credit card providers could be aiming to meet increased demand from those out of work.
Many credit card providers have also reduced the amount someone would need to earn before successfully applying for a credit card. The annual income required for a successful application has decreased year-on-year from an average of £9,718 last year to £9,035 in 2012.
Should the trend continue for another year, or at least stay the same, this would take it below the amount people need to earn before paying income tax, which the government announced will rise to £9,205 in April 2013. Currently people can earn up to £8,105 per year before paying the basic rate of tax.
Credit card providers are also letting more people in on their top cards – the minimum income required for a platinum credit card has decreased by 36% from an average of £18,425 in 2011 to just £11,838 this year.
Meanwhile, the number of credit cards available and aimed at people with substandard credit scores or limited credit histories have increased by more than half from five last year to 11 in 2012.
However, despite credit cards potentially becoming more attainable over the past year, the Confused.com study shows average interest charges and fees have risen, making borrowing more expensive.
The average balance transfer fee has increased from 2.27% in 2011 to 2.81% this year. A person transferring a balance of £2,137, which is the average balance moved onto new cards, would have previously paid £48.51 on average. With the increase, they will now pay an average fee of £60.05.
Looking at the whole of the UK market, interest rates have increased since last year – representative APR has gone up from an average of 18.5% in 2011 to 20.5% today. Confused.com started to compare credit cards in 2008 and customers can compare credit cards from across the whole of the UK market.
Nerys Lewis, head of credit cards at Confused.com, said: “As credit card providers make more cards available to more people, we are warning consumers of the dangers of debt as it appears to be increasingly easy to obtain yet more expensive to get rid of.
“However, credit cards can offer consumers a number of benefits, such as earning rewards on their spending, offering purchase protection, and improving their credit scores, so we’re simply urging people to use them in a responsible manner, as well as shop around to get the best deals.”