Stretched to the limit

Summer's over but, thanks to credit cards, many of us will be forking out for our August holidays for months to come. As new figures show, Britons are getting further and further into debt.

Bashing the plastic has become as much a part of holiday times as delays at airports and sudden downpours at English seaside resorts.

Easy money

In addition thousands of student who graduated in July will be facing demands to start paying off the debts they accumulated at college.

According to the national Consumer Credit Counselling Service (CCCS), for as much as 5% of the population "consumer credit" debt - which mostly translates as credit card debt - has become a serious problem which can lead to misery, homelessness and family break up.

Seriously Worried

Total consumer indebtedness has reached £700bn - before mortgages that amounts to about £5,300 per household.

But the overall figures mask a significant minority who owe far more.

The CCCS, which is funded by the credit industry, gets around 100,000 calls a year to its free hotline. It provides lengthy counselling sessions for 15,000 seriously worried people each year and organises 6,000 repayment plans.

The service defines those who owe more than 20% of their take-home earnings to credit companies as facing potential difficulties.

'Stretched and stretched again'

A typical middle-income earner will start to feel the pinch when repayment reaches between £300 to £400 a month. If the bill is any higher than this the service recommends people cut back on spending and try to reduce the amount owed.

Shop until you drop

But many of those counselled have much higher debts than this - up to 44 times their income in one case dealt with by the service last year.

"There's a pattern of people in the late 20s and early 30s stretching themselves to get a mortgage and then stretching themselves again and again to furnish their home and buy a car on credit," says a spokeswoman.

"The problems start if income falls - they might have their hours of work cut or there might be an unexpected pregnancy - and they can soon find themselves in difficulty, especially if they try to ignore the problem".

Student debt

The advent of the student loan system and the vastly increased number of young people who go to university and live on credit of one type or another has led to a greater social acceptance of debt, the service believes.

"Student loans are not in themselves a problem, but they may have accustomed young people in general to the idea of being in debt."

That'll do nicely

Fifteen per cent of all credit cards are owned by students - even though they have little or no income - and, the service fears, many use credit to pay their way through college, in some cases setting themselves up for a life struggling to make repayments.

There is evidence that many students take an "in for a penny, in for a pound" approach - since they are already in debt, they continue to build up the total in a way their parents might not have done.

Consolidation

But the most serious mistake a heavily indebted person can make, the service believes, is to turn to a finance company offering "debt consolidation".

This is the idea - heavily advertised to lower income house owners - of allowing one company to take over a series of debts and bundle them into a supposedly "manageable" single monthly payment.

"We always advise against debt consolidation if it means, as it usually does, turning unsecured debt into secured debt, because this means you can lose your home," says the spokeswoman.

Repayment plan

"When we are working out a repayment plan for someone we always make the mortgage the priority, and then try and work out what can be paid back.

"At first the [credit] industry was sceptical. They looked at the budgets and say things like 'you've put in something here for them to buy cigarettes - they should be paying that money to us'.

"But now they tend to accept that if we say somebody can't pay, they can't pay."

As a result, the service claims, most of its repayment plans "stick" and the industry was able to recover £26m a year. If unrealistic demands for repayment had been made, the industry might have recouped far less.