'Don’t cut up credit cards'

Brits struggling with debts are being urged not to cut up their credit cards – but stop using them.

As the levels of personal insolvencies rise for the first time since 2006 amid the credit crunch making borrowing harder, those struggling with debts are opting for extreme measures.

Currently the UK owes £229.5 billion on credit cards, overdrafts and personal loans.

However, people struggling with debt are being urged to lock their cards away – but keep them for the long term.

“A natural instinct when getting to the point of facing too much debt, especially on credit cards, is to cut them up” said Neil Munroe, external affairs director at credit reference agency Equifax.

"But while it’s important to stop using credit when you’re already struggling to manage repayments, we do advise that consumers don’t cut up all their cards."

He advised people struggling with debts to first get their financial matters in order.

"But once they have achieved this they may want to use credit in a responsible way to support their finances in the future," Mr Munroe said.

"If they have had a record of debts and defaults then they will find that new applications may not be accepted. So our advice is stop using credit cards and do everything possible to pay off outstanding balances, but don’t cut them all up.”

A poll by Equifax of those obtaining credit reports found a third were worried about running into financial difficulties in the next 12 months.

Furthermore 35 per cent said they had short-term debts of over £10,000.

"Credit cards are a costly way to pay for essentials if the bill isn’t paid off in full at the end of each month,” said Mr Munroe.

”But we do acknowledge that having access to credit could be useful in the future and that’s why we are advising that consumers don’t cut up all their cards.

“It’s also crucial not to forget any cards on which there are outstanding balances – any overdue payments will be shown on an individual’s credit file and will be taken into account by lenders when new applications are made. It’s worth consumers getting a copy of their latest credit report to make sure no cards are forgotten.”


Daniel Barnes