Are you feeling the financial squeeze?

By Reno Charlton
News Editor

Along side the "credit crunch" is the "financial squeeze", a naming of the pressure put on personal finances due to interest rate rises and inflated prices for food, energy and petrol.

When the cost of your mortgage goes up, you tighten the belt a little to cover the increase. But when the cost of putting food on the table, heating your home and filling up the car rises too – it can tip budgets over the edge.

Adding fuel to fire is simply the time of year, January is rarely a good time for finances, with festive spending often paid on credit, larger than usual bills can be finding themselves on the mat.

A recent study carried out by the Post Office has shown over a quarter of us have become more reliant than ever on credit cards.

Gary Fitten, director of lending at the Post Office has been quoted saying "Typically January is the time of year when people struggle with their money the most. Many people have over-stretched themselves over the Christmas period and have little choice but to use their credit card in the New Year."

If you have recently found yourself pulling out your credit card at the checkout instead of paying by debit card or cash, then you must ask yourself are you putting it on the right plastic?

Four in ten people now rely on credit cards to fund their day-to-day spending, and it is therefore essential to be using the right credit card for your needs.

With the cost of food, energy and petrol on the up, it's becoming more and more common for people to miss bill payments, and, it certainly doesn’t help when additional interest is added to credit card balances, pushing monthly outgoings up ever further.

Using the wrong credit card could be costing you hundreds of unnecessary pounds a year, and simply by switching to a more suitable deal – this money could be helping to lighten the load of the financial squeeze instead.

Lyndsey Burton, Director of Credit Card Comparison Online, stated "The choice of cards available today means that most people could find a more affordable deal on a credit card and lessen – if not avoid – a difficult financial situation."

"Simply by switching to a lower rate deal, a saving of over £140* could be made by moving a £200 monthly spend with minimum monthly repayment from a 16.9% p.a. rate card to one offering 9.9% p.a over the course of a year. Even moving to a more accessible 12.9% p.a. would still save over £80* over a year."

"Of course, even more savings are available by using a 0% purchase credit card, or moving current outstanding debts to a 0% balance transfer deal – or if the balance is large and you want to repay just the minimum, a life of balance transfer would cut interest by a staggering £1090** by the time the balance is repaid compared to repaying just the minimum on the same balance on a typical rate of 16.9% p.a."

Despite the credit crunch if you have a good credit rating you will find that you can save a small fortune by ensuring you take out the right credit card.

* Savings based on the following cost example, please note amounts are approximate:

Spending £200 month (on purchases only) and repaying the minimum amount (3%), over 1 year, on a credit card charging:

** Savings based on the following cost example, please note amounts are approximate:

Repaying a balance of £5,000 (with no extra spending), with a minimum (3%) monthly amount of £155, on a credit card charging:

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