Financial analysts at Credit-10 have noted that many European consumers are highly dependent on their credit cards as the months go by. However, it was also noticed that this dependence occurred without full knowledge of what they are getting into, as most borrowers have no idea of the monthly interest rates they pay. This can be financially dangerous as it creates new debt, potentially becoming a burden to let go of, especially if responsible lending programs are not adopted. So, it is important to raise the topic of the need to pay special attention to credit cards.
How Does Credit Card Debt Increase?
According to statistics gathered by Bankrate LCC in December 2022, over 46% of credit card owners do not fully pay off their debts monthly. However, the 7% increase in this number from the previous year did not go unnoticed. As purchasing power continues to decline with things getting even more costly, it is only expected that many of these people continue to borrow more with almost no extra means of repaying the debt.
Bankrate LCC also asserts that about 43% of the card owners with increasing debts are unaware of their debts as they are unaware of the interest rates associated with their cards.
Before Using A Credit Card, Be Sure To Check Consumer Loans Interest Rates For 2023
As of January 2023, the average interest rate in the Euro area was around 4.7 per cent. Malta had the highest annual interest rates on consumer loans amongst other credits, which amounted to over 127 per cent. This record had a supermajority as it exceeded other countries in the zone with over 100%. However, France, Netherlands and Belgium were among the better-performing countries with less than three per cent interest rates, some of the lowest rates in the eurozone.
The European Central Bank has constantly increased interest rates to combat inflation, making loans harder to qualify for or pay off. In 2023, interest rates are expected to hit a four-decade high as the Central Bank strives to end inflation and reduce recession panic with a target of nothing more than 2.0%.
Not being aware of the interest rates means not knowing exactly how much debt you have. With constant wages compared to when interest rates were significantly lower, it is only expected that many households now have trouble paying small debts they could easily pay off before, except in situations where more money is being made.
Most borrowers who have made more money can fully pay off their credit card bills at the end of every month. However, the repercussion of this is that they might eventually spend all of that extra income paying off the interest on debts.
One reasonable solution suggested by Credit-10 experts is actively introducing responsible lending programs for credit cards, which will help borrowers decide what they should take loans for and just how much loans they can afford without creating a debt overload.
