One-in-five (22%) British adults have had an outstanding credit card balance for at least six months, including the 4% of British adults who have had an outstanding balance for over five years, according to a survey of over 2,000 British adults by insolvency trade body R3.
The research, part of a long-running survey of Britain’s personal finances by R3 and ComRes, also found that, of the 34% of British adults currently worried about their level of debt, 49% are worried about their credit card debt – by far the most common cause of concern of the types of debt tested.
Mark Sands, chair of insolvency trade body R3’s Personal Insolvency Committee, says: “With low interest rates, lengthy interest-free periods, and a poor period of real wage growth, credit cards have become a necessary crutch for some households. The problem is that credit card debt can be so easy to accumulate. Contactless payments and automatic minimum repayments can make it easy to lose track of spending and the total amount owed.
“When taking on any new debt, including a credit card, it’s very important to have a plan for how to repay it. Taking on more debt or continually putting off repayments is not the answer and will only make existing financial situations worse. Credit cards aren’t a long-term solution for serious financial difficulties, but they can be treated like that.
“For many, credit card debt is affordable. Interest-free periods and transferable balances can help make things manageable. But, it is very easy to be caught out or for small balances to snowball. Where people have outstanding balances which are several years old, you worry about whether that debt can actually ever be repaid.”
Notably, the 25-44 year old age group is the most likely to have a credit card with an outstanding balance. 44% of those in this age group have an outstanding balance, compared to 26% of over-55 year olds (the least likely group to have a credit card with an outstanding balance).
Mark Sands adds: “With a chance of Bank of England base rate rises over the next year or so, which underpin the rates at which commercial lenders price their lending, credit card borrowers may find themselves in for a shock. A significant chunk of the adult population has never experienced base rates higher than 0.5%.”
The research also shows that, of the 34% of British adults who say they often or sometimes struggle to payday, 27% say they struggle because of making credit card repayments.
Mark Sands says: “While credit cards can be a quick fix for financial problems, they can store up problems for later. It’s really important that anyone worried about their debt, or struggling with their finances, speaks to a qualified and regulated expert about their options.”
The proportion of people with debt worries who are worried about credit card debt dwarves the proportion of people with worries about other types of debt. While almost half (49%) of the 34% of British adults worried about their current debt are worried about credit card debt, overdrafts worry just 20%, followed by mortgage repayments and bank loans (each 15%), and student loans(11%).
Q. Thinking about your credit card balance, which of the following statements apply to any of the credit cards you own? When answering please think about all the credit cards you own and select all that apply, including if you have a credit card with no outstanding balance. Base: all British adults (n = 2,004)
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The research also found that…