Credit, Collections & Insolvency News
The rising cost of living is driving a significant increase in credit card reliance according to new research by Money.co.uk.
The research examined the spending habits consumers are using to cope with the increased cost of living.
The research found that 1 in 4 (24.60%) Brits said that the cost of living is the main reason they use their credit cards, as they don’t have enough money in their current account to cover monthly expenses. Over a third (36.09%) of credit card holders aged between 25-34 reported this as their main reason for credit card use. They’re followed by those between 35-44 years old (32.54) and those aged 45-54 (29.39%).
When broken down per region, cardholders in Northern Ireland feel the need to spread the cost of living the most – 37% of Northern Ireland residents reported this as their main reason for credit card use. This is followed by the East Midlands, with a third (33.33%) of respondents stating this, and Greater London, where over 1 in 4 (27%) reported cost of living as their main credit card use.
Almost 30% use credit cards to cover living expenses and groceries.
In the UK, 29.81% of cardholders mainly use their credit cards for living expenses and groceries. People between 45-54 rely on their credit cards most for day-to-day living, with more than a third (33.94) using their cards for this purpose. They are followed by those aged 35-44 (31.84%) and those aged 18-24 (29.93%).
Possibly due to the cost-of-living crisis, just 6.14% of Brits use their credit cards for socialising – almost a quarter less than those primarily using it for living expenses and groceries. Despite this, retail shopping and holidays are the two next biggest expenses for UK cardholders. Over a fifth (22.02%) of those aged 25-34 use their credit cards for retail shopping, with almost a quarter (23.36%) of Brits aged 18-24 using credit cards for holidays.
Brits aged 18-24 are in 15% less debt than those aged 35-44. Despite owing 15% less (£3,485) to their card providers than those aged 35-44 (£4,148), 18-24-year-olds pay 65% more (£1,088) off their credit cards each month in comparison (£657 for 35-44-year-olds). However, almost a fifth (17.20%) of 18-24-year-olds have had to ask for their credit limit to be increased, compared to 16.50% of 35-44-year-olds.
Salman Haqqi, Personal Finance Expert at money.co.uk, said “Credit cards can offer a flexible and convenient way to borrow and spread the cost of day-to-day spending, so knowing how to manage your credit card can help you get the most out of it and save money.”
“The key to making the most of a credit card is only borrowing what you can afford to repay. To avoid increasing debt, always pay your credit card bill on time. Missing a credit card payment can be expensive, as you’ll likely incur late fees. A missed payment can damage your credit score too, making it more difficult and costly to borrow in the future.”
“Most importantly, check your credit card balance regularly. Monitoring how much you have spent is key so that you never borrow more than you can afford. Most credit card providers now offer a smartphone app where you can seamlessly check your balance and make payments.”
Cost of living is the main reason Brits are using their credit cards:
Main usage of credit card:
