Working simply to serve our debts

IT NEVER fails to amaze me how much people in the UK manage to rack up on their credit cards over such a short time around Christmas. And then are surprised and concerned when they realise they have to pay it back.

For years, commentators in the financial services industry have been warning consumers of the dangers of piling too much on their plastic - it will all come back to bite you, they often say.

Now it appears it has.

Figures from APACS, the UK payments association, credit card transactions in December were worth some 11.4 billion from 197 million transactions.

While these seem to be extraordinarily high figures, an even more worrying statistic appeared at the same time. Research from MoneyExpert.com, the independent financial comparison website, has revealed some 1.145 million bills - ranging from credit cards and mobile phones to utilities and council tax - went unpaid in January as extravagant Christmas spending and early December salary payments hit home.

Missing a bill might not seem a big deal but it will not go away and often you will be charged with a fee or extra interest if you do not pay up.

Almost one in ten adults admits to having missed a credit card payment during the last 12 months. With the average charge for a missed repayment currently at 12, this means the nation racked up at least 47.8 million in fees on credit cards alone in 2006.

It is also possible that the service provider will withdraw their product from use, typically with telephone and the internet. So if you know you have overlooked a payment, do not hang around or you will pay for it in inconvenience, cost and pure frustration.

If you find yourself in this position, what should you do? January is the most popular time of year for people to review their finances. If you cannot afford to pay all your bills, you might need to consolidate your debts or consider a more affordable repayment plan.

My advice is to tell your bank or service provider if you are struggling. The more honest you are, the more they will want to help.

If that is not enough to make you depressed, the amount of time needed to cover the interest on personal debt has been worked out.

As many employees open a long-awaited January pay slip, experts warn that interest on personal debt has swallowed up the entire month's earnings. Latest figures from Unbiased.co.uk, the organisation promoting the benefits of independent financial advice, show that, as a nation, we have worked 31 days solid to earn enough money just to service the interest on our credit card and loan debt, making the fictitious "Debt Freedom Day" 1 February this year.

Debt Freedom Day does fall slightly earlier this year, which is undoubtedly good news. It means average levels of personal debt continue to fall year on year.

But the real headline will come when official figures show people controlling their spending behaviour and increasing their saving power, when this date becomes a non-event.

WE ALL know we have to have it, but does anybody really know what they are paying for when it comes to car insurance?

If your answer is "no", you are in good company. Apparently 11 per cent of car owners have no idea.

Research from online car insurance provider easyMoney also shows another 14 per cent do not think they would be insured if their car was stolen and 15 per cent would not expect cover in the event of a fire.

In reality, however, everyone with comprehensive or third party, fire and theft car insurance would be insured.

The statistic that baffled me is that apparently almost seven out of ten people are confident their insurance is value for money - despite not knowing what is in their cover.

Over the past three months, the average premium quoted for a comprehensive car insurance policy jumped by a massive 4.35 per cent to nearly 806. This is nearly double the average quoted in 1994.

It strikes me as amazing that so many people are shelling out so much money with no idea what they are paying for and for "services" which they are never likely to use.