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Banks have increased their onslaught of credit card customers to offset losses due to increases in bad debts and the cap on overdraft fees.

“The tactics used include the magically appearing annual membership fees, charges for pseudo-cash products such as credit-card cheques, and hidden catches in balance-transfer deals.

The banks have been playing a sleight-of-hand game with their consumers for years. Now it has stepped up to levels that catch most consumers off-balance. In fact, many consumers build up hundreds of pounds of ‘hidden’ charges before they catch onto the bank’s ploy.

One of the biggest tricks is the five pound scheme. The credit card has no minimum balance each month.  Instead of a minimum monthly repayment the customer pays the monthly interest, plus premiums for payment protection insurance, plus fees, plus £5. However, this means that the average person never actually repays any of the capital from one year to the next.

Another scheme pays of the least expensive debt first.  The more expensive debts accrue more interest for longer periods – and of course, the interest is often calculated on the full total of the purchase until paid in full.  This means that all the small purchases are repaid quickly, leaving the large payments languishing on the card for months, or years.

Credit card, and most unsecured loan debts, have higher interest rates than personal loans.  Some unsecured loan debts are currently as high as 25%, and expected to increase at least one more time this year.

“The government is looking tired and stale, and Brown has been tarnished by that,” said Peter Kellner, chairman of YouGov Plc, a polling company. “On its own, the budget won’t be enough to turn around Brown’s fortunes. It will be part of a bigger process to win back support.”

Debt reduction has not been a main priority for Britain’s budget since 2003. Brown expects a deficit of 2.8 percent next year.

“He doesn’t have much room to maneuver,” George Bull, of tax at Baker Tilly Financial Services in London, said. “He should take measures to boost competitiveness, but he doesn’t have the money to finance a cut in tax.”

“The rise in public spending as a share of GDP in the last five years has been striking,” Brian Coulton, an analyst at Fitch Ratings Inc., said in a note to clients. “It has been sharper than the previous episodes of rapid growth over 1980-83 and 1989-1993, both of which encompassed two major recessions.”

Most consumers are unable to fathom the limits of government debt.  However, the more loans the government carries, the more burden is put on the average consumers.  Many consumers are hoping for tax breaks.

Consumers are rarely interested in the budget, beyond learning whether it will offer financial relief.  Tax relief increases consumer’s ability to repay their own personal loans, or secure future loans.

Consumers are frustrated at the government’s attempts to curb their own spending through increased taxes on loans, while increasing the national debt through their own spending.

If you are a student in Uni, you are probably busy concentrating on your studies and trying to get an education that can benefit you for the future. A proper financial education is not one of the most important things on your mind.  However, it is during your time as a student that you should start learning the basics of managing your finances.  By learning how to properly manage your finances early on, you will then be able to properly manage your finances in the future and start off your life with little or no debt.

If you own a credit card, you will want to avoid using it, except in emergency situations.  If you do use a credit card, then you will want to make sure that you pay off your balance each month.  Carrying a balance on your credit card will cost you extra in interest, so paying off the balance before the interest-free period will save you.

If you are paying bills, such as utility costs, you will want to make sure that the bills are paid on time.  By paying your bills on time, you will start building your credit history and a good habit.  If you fail to pay your bills on time you will be charged late fees, which can easily add up.  To ensure payment on your bills, you can set up a standing order or direct debit. A good credit history now will help in later life when you need a personal loan for buying a car or a mortgage to buy your first property.

Finding a good bank account is important, and because several banks offer discounts on student accounts you shouldn’t find it hard to find a good account.  You will want an account that will offer you an overdraft and a good interest rate.  It pays to shop around, so before settling for a bank, make sure that you check out what other banks are offering.

Debt statistics are updated monthly.  Government, banks, and loan firms use these numbers to determine how they do business.  Consumers can use these numbers to differentiate between ad copy - meant to sell products - and a real look at the UK economy

The total UK personal debt exceeded £1.25 trillion.  At the end of January 2007 it stood at £1,300bn. The growth rate increased to 10.5 per cent for the previous 12 months, or an increase of £114bn.

Total secured loan lending exceeded £1 trillion (£1,000 billion) and at the end of January 2007 it stood at £1087bn, an 11.5 per cent increase over the last 12 months.

The average household debt in the UK is £8,795 (excluding mortgages) and £53,701 including mortgages.  This is far less than IVA and debt management firms are claiming.  These numbers bring the supposed ‘debt mountain’ to a more manageable ‘hill’ – and corroborates the Bank of England’s numbers.

Average owed on loans by every UK adult is £27,638 (including mortgages). This grew by £200 in February 2007.

The average interest paid by each household this year is approximately £3,425 each year.

The average unsecured consumer borrowing via credit cards, motor and retail finance deals, overdraft loans and unsecured personal loans rose to £4,526 per UK adult at the end of January 2007.

Britain’s personal debt is increasing by £1 million every 4 minutes.

This paints a strong picture of the average UK consumer’s ability to manage their debt.  While many households are struggling under debt, many analysts believe that a good debt management councillor will serve most UK consumers better than an IVA firm.

The UK banks are preparing to defend their market against the same problems seen in the US sub-prime market.

Will the US situation hit the UK? Boulger of mortgage broker John Charcol does not think so. ‘But it is something the regulators will be taking into account. A lot of borrowers in the US were on short term ‘teaser’ rates and suffered payment shock when they moved to the standard rate.’

This is something that many UK consumers are being faced with. Despite the UK’s belief that their market is immune, there are parallels between the markets.

‘In the UK it is looking more and more likely that the Bank Base Rate will peak at 5.25%. I would put it at a 50-50 chance. Even if the economy does suffer because of what is happening in the US, we will be less susceptible to a downturn as we have lower exports to the States.

‘In addition we don’t have the same high proportion of sub-prime borrowers on 100% home loans. But if there is any tightening of lending criteria it is going to happen in the sub-prime and adverse markets,’ Boulger says.

Boulger believes that ‘the lenders have found that credit scoring is a very efficient predictor of those borrowers who will default,’ Boulger says. ‘You can never be certain, but I don’t think in the short-term what is happening in the US will affect lending criteria here.’

This is dividing the market into two segments, those who will strengthen the market by investing in property to build wealth, and those who will undermined it by borrowing mortgages which they cannot repay.

The trickle effect has finally hit the UK economy as consumers tighten their belts after four, almost successive, interest rate hikes. However, analysts are still reminding consumers that the interest rate has not hit the ‘breaking’ point of 6 per cent, nor has it hit the levels it did a decade ago.

Despite high spending in the retail sector last January, there are now reports which indicate that consumers are not spending as heavily as they once did.

Nationwide’s Consumer Confidence index is slightly higher than last month, as reported in Reuters.

“The index seems to be showing that consumers are responding to the three increases in interest rates. All of the indices are well below the levels recorded before the first rise in rates,” said Nationwide chief economist Fionnuala Earley, reports Reuters.

“Consumer sentiment remains fairly downbeat, but underlying feelings about jobs and income have not collapsed which suggest a fairly stable economic background,” she added.

However, there is good news for consumers who are trying to reduce their debt.  The Bank of England increased the interest rate in an attempt to lower the inflation rate.  While the interest rate impacts the economy, short term, a high inflation rate would create problems for years to come.

This leaves consumers who are trying to build wealth a window of opportunity to take advantage of the buy-to-let or residential housing market.

This is a good time to start a new business in many sectors except retail.  It is still relatively easy to apply for a secured loan that can be used to set up a business.

The charity Consumer Credit Counselling Service (CCCS) advised 50,472 people between June and December 2006.  This is a 66% increase in the number of people with debt management problems that it helped  during the same period in 2005, to 30,450.

The CCCS said this is due to the fact that they are expanding the services they offer UK consumers. However, the charity also points out that single people in the UK as now the most vulnerable to debt related problems.

A Debt Counsellors survey claims that  22 per cent of married consumers do not tell their spouse about their debt problems,  and 27 per cent have kept debt problems a secret from the person they are living with.

There are several venues that believe many of the problems single people face are caused by their partner’s ‘hidden’ debts.  Many of these consumers may expect to separate assets when they divorce.  However, more and more, UK consumers are finding that their wealth is swallowed up by hidden debts, and that all the couple has to separate are debts.

This problem will only grow as recent figures suggest that 1 in 5 UK consumers are considering bankruptcy.  This translates to almost 9 million consumers who feel that their debts are so high they must declare bankruptcy.

However, the number of people who are having trouble repaying their debts has dropped by 7 per cent from last October.  The number of people who have problems paying their monthly debts and bills has dropped 40 per cent.

Transferring debt from one credit card to another can be one way of helping you to manage your debt and pay it off quickly.  This is known as a balance transfer.  There are many credit cards on the market that advertise 0% on balance transfers.  If you find that your current credit card rate is too high for you to make an impact on reducing the balance, then you may want to consider transferring your balance to a credit card offering a 0% introductory offer.

If you are currently being charged a high interest rate on your card, and you are unable to make a dent in the balance because of it, you will find that you will benefit greatly by switching cards.  Before you switch cards, you will want to ensure that you are eligible for the offer.  If you are, then you will want to find out how long the 0% interest rate is being offered for.  Some companies offer a 0% interest rate on balance transfers for 3 months, 6 months, or even 12 months.  So it will pay off to shop around and find one that will offer a longer interest rate period.

Another thing to look out for when comparing offers is the handling fee that credit card companies will charge on balance transfers.  Although the interest rate may be 0%, the company will still charge a percentage for handling fees.  Often these fees can range from 2%-4% on the total amount being transferred.  You will want a card that will offer little or no handling fees on your balance transfer.  You will also want to be aware of any additional charges that the card company may charge you, and make sure you are aware of the interest rate that will be charged once the introductory rate offer expires.  Often the interest rate can be extremely high, so be aware of them.

Millions of Brits are now deep in debt and not ashamed of owing money. In fact, it is more of a stigma to rent and remain out of debt, or even build wealth, than it is to be hopelessly in debt and forced into bankruptcy.

Debt is now the norm in the UK. Teenagers start to build debt while still at school, and not on student loans, but on clothing and luxury items.

College students owe an average of £28,000.

Married couples owe their combined wages for four to five years to come. In many households, this debt excludes the mortgage.

The current figures claim that the UK personal debt levels increases £1,950,000 every 3.85 minutes according to Credit Action, a national money education charity.

“Our passion is to help people stay in control, rather than let money control them and disrupt their lives through over indebtedness,” says a spokesperson.

A Conservative Party poll suggested that as many as 9 million people are struggling to cope with serious debt problems. However, the Bank of England counters by claiming that 53 per cent of the people they polled expect to clear their debts by the end of 2007, excluding their mortgages.

This is hard for some watchdog groups to believe.  Currently, there are more credit cards than people.  APACS states that, in 2005, there were 74.6 million credit and charge cards compared with 60 million people.

The Financial Services Authority said that almost a third of all teens and young adults between 16-24 years old cannot manage a weekly budget.

The Authority, a statutory body set up under the Financial Services and Markets Act, said that 94 percent of all 16-year-olds believe it is important to know how to manage money, but only 53 percent are taught how to do so.

For people with bad credit, or no credit, it can be difficult to obtain a loan.  However there are lenders who offer loans for those with bad credit.  Majority of lenders only offer secured loans because they consider lending to those with bad credit a risky investment.  A secured loan means that the lender will require some form of security for the borrower that is equal to, or more than the loan amount.  The security offered by the borrower is usually their home or property.  However secured loans can become a bad decision if you fall back on payments, as the lender will be able to repossess the property to reclaim their funds.

When you apply for a bad credit loan, the lender will first check your credit score to determine if they will lend to you, it will also help them to determine what interest rate they will offer you.  Typically the interest rate that is offered to those with a bad credit history is higher than a standard loan rate.  The rate is higher because lenders are protecting their investment.  However, as with any loan the interest rate that lenders offer you depends on your personal situation.  It is best that you compare rates from various lenders to ensure you receive the best possible rate.

Bad credit loans are usually offered by lenders who have access to a variety of loan plans allowing them to offer you the lowest rate that fits your personal situation.  Those who have a better credit history are more likely to be offered a lower interest rate than someone who has a poor credit history.  However, you should be wary of any lender who offers a rate that you feel is extremely high.  You should never feel obligated to sign for a loan if you do not feel you are getting the best rate or the best service.