I've often wondered about all those opinion polls that seem to reveal things like eight out of ten owners say their cat prefers Whiskas, how the Labour and Tory parties are currently running neck and neck in popularity terms and how women are better drivers than men.
As Mark Twain once pointed out: " There are three kinds of lies: lies, damned lies and statistics" so I have a tendency to take these surveys with a large pinch of salt.
Besides, there's also the line from the American comedian, George Carlin, which goes something like: "Think about how stupid the average person is and realise half of them are dumber than that".
Nevertheless, I was quite fascinated when I read a compilation of all the latest debt statistics put together by the money education charity, Credit Action. Public ignorance about personal finance matters makes me think that George Carlin's quote may be more accurate than Mark Twain's.
Take the following as examples:
A Mori poll recently revealed that nearly four out of five people do not know that APR refers to the interest and other costs of borrowing.
According to the British Bankers' Association the proportion of credit card balances bearing interest was 75% in February 2006. The average interest rate on credit card lending is currently 15.7%.
In 2005 the average unsecured problem debt of a client starting a debt management plan with Consumer Credit Counselling Service (CCCS) increased by 10.5% to £29,400.
So, are these lies, damned lies and statistics or are people really that dumb? Three quarters of all credit cards are attracting average interest charges of nearly 16% because their owners have never heard of 0% credit card deals? And it's because they don't know what APR means? And people with serious debts have genuinely managed to spend nearly £30,000 before they realise they've got a problem?
I suspect much of these problems can be attributed to apathy and greed. These people know they could manage their money better, they just want too much stuff and can't be bothered to save up for it. And that is backed up by PricewaterhouseCoopers insolvency experts who looked at 80% of the Individual Voluntary Arrangement applications made in July 2005. Three quarters of the debtors put down "living beyond their means" as the main reason for being in trouble. Only 20% said they had lost their jobs or had suffered a breakdown in their marriages — two of the events traditionally thought most likely to trigger personal insolvency.
Mind you, there is the question of how culpable lenders are. According to a survey by uSwitch, most credit card holders were issued cards without the lender carrying out any checks to verify that they could afford to repay the debt.
It seems that 88% of people who successfully applied for a credit card during the last year were not asked for proof of their annual income beyond the figures stated on the application, and 95% were not asked to show evidence of their outgoings in order to provide a true picture of affordability. To my mind that makes the lenders even dumber than their customers!
Motley Fool
Read more at: IVA UK site.”>http://iva-uk.blogspot.com/2006/04/lies-damned-lies-and-statistics.html.
