Nearly a third (31%) of credit cardholders have been unable to repay their balance in full each month since the pandemic began, which can lead to further interest and debt accruing due to high APR rates, according to new research from comparethemarket.com. Among 25-34-year-olds, this figure increases to more than two-fifths (41%).
Millennials are the hardest hit of any age group, with more than half (57%) of those aged between 25-34 struggling to meet monthly credit card repayments. A fifth (22%) say the pandemic has hit their finances, and 18% say the financial strain is a result of having to pay other household bills first.
It is not only the Millennial generation struggling; 40% of respondents across all age groups have struggled to meet repayments since the pandemic started, rising to almost half (49%) among 35 to 44-year-olds. Over the long term, more than a quarter (28%) worry about paying future bills.
Almost two thirds (61%) believe that providers need to do more during this time to help those who are struggling to pay bills. However, as the Financial Conduct Authority (FCA) deadline for applying for a payment holiday ends on 31st March, comparethemarket.com is urging any individuals struggling to get in touch with their credit card provider as soon as possible to ask for support.
Failure to pay credit card bills on time can be costly and make it harder to borrow in future. Individuals may have to repay more interest due to high annual percentage rates (APR) – 25% on average according to Moneyfacts – or see their providers report missed payments to credit reference agencies.
Missed payments on a credit report can decrease an individual’s credit score and impact their ability to secure credit, including balance transfers, a mortgage or a personal loan. Since the pandemic began, less than a fifth (18%) have seen their credit score improve, while 12% who have applied for a new credit card in the last year have been declined.
Credit building cards can be a beneficial way to improve a poor credit score if repayments are made on time. However, more than two-fifths (44%) of those surveyed are unaware of these cards and the benefits. Individuals can also shop around online to compare credit cards and APR rates to see if there are other alternatives available – 0% APR balance transfer or purchase deals – or those with a lower interest rate. However, according to those surveyed, more than half (52%) agree they are only sticking with their current provider for ease, and more than one third (38%) cannot be bothered to switch.
James Padmore, Head of Money at comparethemarket.com, said “It is a concern that many still struggle to pay off credit card bills. If a bill is not paid off in full each month, interest can build up and this can lead to other financial difficulties and stresses.”
“If you are worried about repayments, there is help available. It’s strongly recommended not to miss your payments altogether and to let your card provider know if you’re having problems. The FCA has guidance for credit card providers to offer immediate support to customers facing temporary payment difficulties with payment breaks. However, this support is set to end soon, so it is crucial people speak to their provider as soon as possible. While interest will still accrue in this period, it could give you some breathing space and temporary relief from payments. Money management services and debt charities continue to offer free confidential advice too..”
“For those who are looking to rebuild their finances if they have taken a bump over the last year, credit building cards, can be a great way to improve your credit rating. It is always worth looking online to see what options are available and using an eligibility checker to see what deals you could be accepted for without affecting your credit score.”