It's time we raised our own interest on finance deals

It's not just loan sharks who fail to offer the best credit deals; the high street often doesn't, either Melanie Bien

We are told how many units of alcohol we should drink in a week, that smoking is bad for us and that we should watch what we eat and take more exercise. But when it comes to the rate of interest we pay on loans, credit and store cards, we're on our own.

We are told how many units of alcohol we should drink in a week, that smoking is bad for us and that we should watch what we eat and take more exercise. But when it comes to the rate of interest we pay on loans, credit and store cards, we're on our own.

The Government has resisted demands to force credit providers to stop imposing extortionate rates of interest, despite fears that consumer debt is rising to uncontrollable levels. According to the latest Bank of England survey, the nation is in debt to the tune of £1 trillion - and rising - on cards, mortgages and loans.

But the stance taken by the Department of Trade and Industry (DTI) suggests we may not be living in a nanny state, after all. And even though we are becoming ever more indebted, the ministry may prove to have made the right decision.

The least well off and financially naive often end up paying the highest rates of interest on loans and plastic, either because they have a poor credit history or they don't shop around. But research shows that an interest rate ceiling may only make their situation worse.

In other countries, such controls have led to those on low incomes being excluded altogether from mainstream credit deals. This leaves them vulnerable to loan sharks.

But while the Government may be wise not to cap interest charges, it does need to do something. Citizens Advice says that high-pressure selling, unfair terms and conditions, hefty charges for letters and statements, and expensive add-ons such as insurance can all be hidden behind the advertised interest rate.

More effort must be made to encourage mainstream providers to offer credit to people on low incomes - with sensible rates of interest. More responsible lending also needs to be promoted, so those who have no hope of repaying huge debts aren't allowed to run them up in the first place.

However, one wonders how this can be achieved, since credit providers are clearly there to make money. Who hasn't had the credit limit on their plastic increased, even though they never asked for it? I've ended up with enough credit on my cards to run up more than £30,000 of debt. I'm not about to go on a spending spree, but how tempting could this be for someone who can't stop splashing out?

Better education on our financial management is also a must. This needs to start in schools, because many parents aren't disciplined enough themselves to be able to pass good financial habits on to their children. I was lucky: my parents encouraged my brother and I to have savings accounts, and we never received pocket money. Cash was something that had to be earned because then you appreciated it.

Children need to learn the value of saving and the danger of running up debt that they can't afford to repay. As society grows increasingly materialistic, this isn't always easy, but that's why it is so important the lesson is learnt.

Making consumers aware of the need to look for good deals on financial products is also a vital part of this education. Although my colleagues are amused at the number of times we recommend "shopping around" in these pages, it really is the best piece of financial advice I could give to anyone.

Nearly every article in this week's Money section extols this virtue: we discuss how to find the best deals on car finance, on mini cash ISAs and on gas and electricity charges. If you don't make the effort, you are taking pot luck.

Just this past week, two people who asked me for advice about their debts, which have spiralled out of control in both cases, told me their mortgage lender is also their current account provider.

When I queried why this was, both said they'd been with their lender for years and had always got a good deal. But knowing the lenders concerned, I'm sure this isn't the case. They don't know this, however, because they've never bothered to shop around.

It's not just loan sharks who fail to offer the best deals on credit; the high street often doesn't, either. Personally, nothing cheers me up more than getting a bargain when I go shopping - and that's just as true of an insurance policy or a mini cash ISA as it is of a new pair of shoes.

m.bien@independent.co.uk

Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    SThree: Recruitment Resourcer

    £20000 - £21000 per annum + uncapped commission: SThree: As a graduate you are...

    Ashdown Group: Junior Application Support Analyst - Fluent German Speaker

    £25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

    Recruitment Genius: Customer Service Advisor

    £15000 - £16000 per annum: Recruitment Genius: A Customer Service Advisor is r...

    Ashdown Group: Trainee Consultant - Surrey / South West London

    £22000 per annum + pension,bonus,career progression: Ashdown Group: An establi...

    Day In a Page

    Syrian conflict is the world's first 'climate change war', say scientists, but it won't be the last one

    Climate change key in Syrian conflict

    And it will trigger more war in future
    How I outwitted the Gestapo

    How I outwitted the Gestapo

    My life as a Jew in wartime Berlin
    The nation's favourite animal revealed

    The nation's favourite animal revealed

    Women like cuddly creatures whilst men like creepy-crawlies
    Is this the way to get young people to vote?

    Getting young people to vote

    From #VOTESELFISH to Bite the Ballot
    Poldark star Heida Reed: 'I don't think a single bodice gets ripped'

    Poldark star Heida Reed

    'I don't think a single bodice gets ripped'
    The difference between America and Israel? There isn’t one

    The difference between America and Israel? There isn’t one

    Netanyahu knows he can get away with anything in America, says Robert Fisk
    Families clubbing together to build their own affordable accommodation

    Do It Yourself approach to securing a new house

    Community land trusts marking a new trend for taking the initiative away from developers
    Head of WWF UK: We didn’t send Cameron to the Arctic to see green ideas freeze

    David Nussbaum: We didn’t send Cameron to the Arctic to see green ideas freeze

    The head of WWF UK remains sanguine despite the Government’s failure to live up to its pledges on the environment
    Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

    Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

    Set in a mythologised 5th-century Britain, ‘The Buried Giant’ is a strange beast
    With money, corruption and drugs, this monk fears Buddhism in Thailand is a ‘poisoned fruit’

    Money, corruption and drugs

    The monk who fears Buddhism in Thailand is a ‘poisoned fruit’
    America's first slavery museum established at Django Unchained plantation - 150 years after slavery outlawed

    150 years after it was outlawed...

    ... America's first slavery museum is established in Louisiana
    Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

    Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

    The first 'American Idol' winner on how she manages to remain her own woman – Jane Austen fascination and all
    Tony Oursler on exploring our uneasy relationship with technology with his new show

    You won't believe your eyes

    Tony Oursler's new show explores our uneasy relationship with technology. He's one of a growing number of artists with that preoccupation
    Ian Herbert: Peter Moores must go. He should never have been brought back to fail again

    Moores must go. He should never have been brought back to fail again

    The England coach leaves players to find solutions - which makes you wonder where he adds value, says Ian Herbert
    War with Isis: Fears that the looming battle for Mosul will unleash 'a million refugees'

    The battle for Mosul will unleash 'a million refugees'

    Aid agencies prepare for vast exodus following planned Iraqi offensive against the Isis-held city, reports Patrick Cockburn