Updated: Apr 20, 2020
Banking trade body UK Finance says that October saw a sharp rise of 12.1% in credit card spending compared with this time last year. The rise is contributing to high levels of debt and charities warn that this reliance on credit could lead to financial troubles for consumers.
Rising Debt, Rising Costs
Brits made nearly 290 million credit card purchases this October, spending an average of £53 each time. These numbers are rising, and that’s contributing to higher levels of personal debt. The Money Charity says that the average UK household now has almost £60,000 of debt. But it’s not always the total figure that’s the problem.
While interest rates on savings remain low at just 0.84% on the average cash ISA), the cost of debt remains much higher. In September 2018, the average credit card interest rate was 18.63%, so if you don’t pay off your credit quickly, the amount you owe may quickly rise.
Given the growing scale of debt, it’s not surprising that UK debt charities are warning against using credit for everyday spends. Not only will interest charges add up month on month, but debtors risk falling into long-term financial trouble if they’re hit with problems such as long-term illness.
This kind of trouble can lead to a ‘debt spiral’, where interest charges keep adding to your debt. In the worst case scenarios, this could lead to bankruptcy – something that happened to 273 people a day between July and September, according to The Money Charity.
STAYING IN CONTROL
If you’re in debt, the most important thing is to start clearing what you owe. The Money Advice Service recommends paying the most expensive card first, and making sure to repay more than the monthly minimums. A balance transfer card with a 0% credit deal can help stop interest charges in the short-term, but beware of companies that put you on high-interest rates when the deal finishes.
If you’re struggling to repay your debts, don’t be tempted to keep putting your costs on credit. Seek help from your credit providers, and from independent charities like the Money Advice Service or Stepchange. And If you’ve received an enforcement notice from Dukes, please contact our team today so we can help set up an affordable repayment plan.