One in two (54%) UK adults are relying on their credit card more than their debit card because of the rising cost of living, according to new research by Comparethemarket. Over a quarter (27%) are also borrowing money from family and friends.
Supermarket shopping is the most popular credit card spending category, with more than one in three (38%) using credit to pay for food. More than a fifth are also turning to credit cards to pay for clothing (23%) and household bills (22%).
Comparethemarket found that the average amount held on credit cards has risen in the past year by £126, up from £1,408 to £1,534. In the face of this debt, 18% have missed a credit card payment in the past six months.
Of these, more than two in five 44% said that the rising cost of living had made repayments unaffordable. Almost one in two (49%) were charged a late payment fee, 35% damaged their credit score, and 27% were charged interest on their repayment.
People who are struggling to keep up with payments could ask their lender for a payment holiday to provide breathing space. According to Comparethemarket, two in five (40%) credit card users have either taken or are considering a payment holiday due to the rising cost of living.
An alternative way to save money could be to switch to an interest-free credit card, with 60% of credit card users using a standard APR card. Standard APR cards charge interest on repayments, whereas interest-free credit cards do not charge interest.
However, interest-free credit cards are typically offered for a set number of months on a promotional basis, meaning people will be charged interest once the promotional period ends.
According to Comparethemarket, one in two (50%) are also using or considering alternative ways of borrowing to cope with the rising cost of living. Of these, 43% rely on ‘Buy Now Pay Later’ schemes, 35% have dipped into their overdraft, and 26% have taken out a personal loan.
Alex Hasty, director at Comparethemarket, said: “It’s concerning that people are increasingly reliant on their credit cards or borrowed money, given rising interest rates, especially for spending on things such as the supermarket shop.
“While having access to credit can help to provide a useful buffer for times where you might need it, be a great way to help manage finances and may also provide extra protection on purchases under Section 75 of the Consumer Credit Act; it’s important to remember you may have to pay additional interest on your borrowing if you do not pay off the full amount, or miss repayments.
“You might be able to reduce repayments, or prevent having to pay more interest, by switching from a standard APR card to a card with an interest-free period.
“You might also be able to save money by switching to a credit card with better rewards or by shifting debt from multiple credit cards to a single card. It’s worthwhile shopping around online and comparing cards to find one that best suits your needs and circumstances.”
