Billpayers struggling to cover their cost of living are turning to credit cards, with spending up 7.7% in July from the same month a year earlier. Here’s how to control your credit card spending.
Barclaycard analysis found spending on credit cards was also up 1.6% from June as shoppers bought clothes and beauty products and services ahead of planned summer vacation stays .
However, spending on overseas travel and restaurant food and drink has started to fall, with Barclaycard suggesting this is due to the need to offset higher spending as disposable income falls and wages grow continues to be overtaken by inflation.
Credit card spending on essentials rose 7% year-on-year, largely due to higher fuel and supermarket prices, said Barclaycard – which accounts for almost half of credit card transactions. country’s credit and debit. He said rising gasoline prices led to a 29.9% increase in fuel spending.
Additionally, nine in 10 Britons told Barclaycard they had noticed the cost of everyday items, including butter and milk, had risen just four weeks ago. Perhaps reflecting this, shoppers have reduced their weekly purchases, with the average value of a supermarket transaction falling from £23.67 in January 2021 to £19.33 in July 2022.
June data from the Bank of England backs up increased credit card spending, showing people borrowed an extra £1.8bn this month, including £1bn of new loans on credit card.
Analysis by the Office for National Statistics showed that it is middle-income people who stick more to their credit cards, with 23% of those earning between £15,000 and £30,000 borrowing more.
Those with very low incomes don’t even make it. ONS records have revealed that one in 20 people earning less than £15,000 are behind on their energy bills and a similar number are behind on their mortgages or rent.
James Gibson, insolvency practitioner at the Debt Support Centre, said: ‘Thousands of Britons are struggling to make ends meet and are turning to their credit cards for help, with more than 92% of Debt Support Center customers in 2021 in credit card debt.
“When dealing with our customers’ credit card debt, we’ve found that preparation plays a vital role in helping them afford the essentials while still having enough money to deal with their credit card debt. .”
Even savers suffer
Meanwhile, Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, said her recent research suggests the proportion of middle-income people with enough savings to be resilient will fall below 50% over the next 12 coming months.
“Those at the lower end of the middle income scale are the hardest hit. They will see the biggest drop of all among those with sufficient savings – from 52% to 42%,” she said.
“On the other hand, it could be worse. Low-income people will start with lower levels of savings and end up with less: only 30% of the lowest earning fifth have enough savings now, and only one in four will have enough in a year.
Control your credit card spending
James Gibson of the Debt Support Center shares his tips for dealing with credit card debt:
A good first step might be a budget review. An easy way to identify how much money you can allocate to credit card debt is to categorize your spending into essentials and luxuries. Expenses that you consider “luxury” are usually the first payments you might consider reducing. From there, you can then look at your “essential” expenses such as food purchases and energy bills to see if there are any other cost-cutting changes you can make here.
It’s also a good idea to know when payments are due and how much you need to set aside to make sure your credit card gets paid on time. Once you understand your budget and try to save money, you can save money and spend it paying off your credit cards.
Try to repay more than the minimum
People want to be able to balance the need to save money and not go into debt with enough income to enjoy life, so they often only pay the minimum each month. However, this strategy means that you could take decades to clear your debt, as most of your repayment will earn interest each month.
Try breaking down the total debt into monthly installments and set up a direct debit to make it easier to manage your finances. If that’s not possible due to the rising cost of living, try switching to another credit card so you have a window of time without interest charges.
With the recent increase in global prices, it’s worth checking out a comparison website to see if you can get a better deal to reduce your credit card debt. Many banks offer free money, rewards, and other perks to new customers who switch accounts. This may cover some refunds to your old credit card.
Do your best to research properly and make sure it’s the right decision to make before taking drastic action. You don’t want to pay higher interest and fees once you’ve switched to another bank or provider – check to see if they have a lower interest rate or a better annual offer. The best option is usually to get a 0% balance transfer credit card, which lowers the interest you pay for up to two years.
If you have several credit card debts, several debt solutions may be available to you.
One option is a debt consolidation loan, which pays off all your debts leaving you with just one payment. Some consolidation loans can be repaid over long periods, which means you can pay lower monthly payments over a longer period to increase your disposable income. However, it is important to note that a consolidation loan is only a good option for you if the interest and fees are lower than what you are currently paying on your existing debts.
Pay off the most expensive card first
Avoid taking more credit if you can. Attempting to take out more credit could make your financial situation much more stressful. You should try to get your current debt back before you consider increasing your current level of debt. If you are having difficulty, we recommend that you speak to a professional financial adviser for advice tailored to your needs.