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We are constantly inundated with messages to encourage us to apply for credit and spend it.
Spiralling debt is fast becoming a way of life. UK citizens alone owe £25,545 (June 2006) including mortgages for every adult, including average credit card and unsecured loans of £4,109 which has increased by 52% in five years.
The average household income in UK is about £20,000 per year, less than the average debt per adult, bearing in mind that there is more than one adult in many households.
We already owe more than we can earn in an entire year, and still we continue to increase our borrowings.
So why are financial institutions and retailers so happy to encourage us to buy goods with money that we have not even earned? Why are companies willing to take a chance, and give us money or products that we may never be able to repay?
The answer is simple. HSBC has unveiled the biggest profits ever by a UK High Street bank, making a pre-tax profit of £11.5bn($20.97bn) in 2005, aided by growth in new markets.
Record profits are not possible without some casualties.
By knowing how financial institutions and retail outlets benefit from the debt we incur, we can teach ourselves how to make good use of good offers, without ending up in the insolvency trap.
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