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