CONSUMER BORROWING SURGES AS COST OF LIVING CRISIS BITES
UK households borrowed money at the quickest annual pace since before the pandemic in March, with the Bank of England reporting that lending rose by £1.3billion in net terms, bringing the annual growth rate for consumer credit borrowing up to 5.2%.
According to the financial experts at money.co.uk, the figures reveal the impact of the cost of living squeeze, which is causing Brits to alter the way they manage their money to make ends meet
James Andrews, Senior Personal Finance Editor at money.co.uk said: “The latest figures from the Bank of England show that UK consumers are borrowing more than they have done in several years, with an extra £800 million credit card debt built up in March alone.
“It’s hard to see what else could be driving this other than the rising cost of living, which has seen prices across the board soar – from food, drink and clothing, to household bills like gas and electricity.
“Credit card spending in and of itself is not necessarily a bad thing, providing consumers with the opportunity to build credit scores, earn rewards, split payments and get protection on large purchases. But that’s only true when done by choice, not necessity.
“If you’re being forced to spend on your card because there’s not enough money in your current account, then you run the risk of entering a debt spiral. This is where being forced to use credit to buy things you can’t otherwise afford leads to you being forced to take on more credit to pay the interest on the first debt.
“This means that you should be incredibly careful and check what else you can cut back on before putting things on credit, as any interest added will only make it harder to repay the month after.
“The good news for people with a decent credit score already is that if you’ve built up debt on a card charging you interest, you might be able to pay less by switching to a 0% interest card.
“Make sure you check to see what you’re likely to be accepted for before applying though, as applying for a card and getting rejected actually hurts your chances of being accepted by another provider.
“Free eligibility checkers can help with this – just make sure you choose one that doesn’t run a credit check first.
“Anyone worried about debt can receive free and impartial advice from StepChange, the UK’s leading debt charity, or Citizens Advice, which offers free impartial advice for anyone struggling with their finances.
“If you’re unsure how different cards measure up, compare the best deals from all the top providers or check to see what cards you’re eligible for using money.co.uk’s credit card finder here: https://www.money.co.uk/credit-cards.”