Bank of England Issues Warning Over Credit Card Debt Issues

According to a recent report from the Bank of England, an increasing number of folks in the United Kingdom are using credit cards to pay off expenses which should not be paid off using such forms of payment. Examples given by the Bank of England include rent payments and mortgages. A growing group of people are making payments for these things with the balance with their credit cards. This can lead to additional problems down the road for these people.

Many charities in the UK have been echoing the statements made by official sources, with one charity going as far as to say that a person who receives a cash advance on a credit card in order to pay a rent payment or a mortgage payment was pursuing an inadvisable way to approach the situation. It is decisions like this that can ultimately break up households and cause others to get into debt which they cannot get out of. There is already a record number of people in the UK who have not been able to keep up. They have defaulted on loans and credit card debt, and some have even moved out of the country for a period hoping to wait out the time in which their debts can be demanded.

More data from the United Kingdom’s central bank shows that out of a survey consisting of 2,202 people, 6% of those who responded said they had withdrawn cash from their credit card accounts in order to pay off rents or mortgage payments. In the face of these claims, lending organizations have made counter claims that they will not accommodate such requests. If the statistic is extrapolated across the whole population of the United Kingdom, some 2,000,000 people would have made payments on their mortgages or rent payments from cash withdrawn from their credit card accounts.

In response to this news, the Mortgage Lenders Council, otherwise known as CML, issued a statement on the topic. The CML claimed that while the survey had been conducted properly, the large number of credit card withdraws were likely used to pay off rent payments as opposed to mortgages. This is because those who use electronic banking to pay off mortgages typically do so with direct withdraws from bank accounts instead of from credit card accounts.

However, the total report by a group called CML approved in November 2010 showed that there were in fact a small percentage of people who were using credit card advances to pay off home mortgages. The percentage was even higher than that released by certain other groups. This CML showed that 11% of people in the United Kingdom had used credit cards to pay off bills. However, the CML tried to play down the news by stating that just 2% from those with mortgages had ever even made a payment for their mortgages by using a credit card. Half of that small percentage paid from a balance by month’s end, as the credit card was used as a last resort.