Credit cards are by far the most commonly used, traditional form of borrowing, particularly for our clients at StepChange – throughout our 32 years supporting people with debt problems, they have always been the most common debt type that we see.
But just because they’ve always been there doesn’t mean they aren’t a problem. In fact, we’ve seen a slight rise in credit card debt this year – which is now held by three in four (73%) StepChange clients, up from 67% a year ago. This begs the question of how much the never-ending pressures of the cost of living is pushing people to borrow more, and what more can be done by the government, regulator and credit card firms to help those who fall behind.
New research we commissioned with YouGov reveals that around eight million adults in the UK find keeping up with their credit card repayments a large burden every month, while around five million have recently used a credit card to pay for essential household bills like food, energy or fuel.
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What we often see at StepChange is that people will be using a credit card, managing the repayments fine, but then something throws them off track. Perhaps they lose their job, a relationship breaks down or a large expense eats up their disposable income or savings. These unpredictable moments in someone’s life highlight an issue with the way credit card products are designed and lent to customers. People may have been in a good position to borrow when they took out the credit card, but these revolving credit agreements last for years, when someone’s financial circumstances change, they are often left struggling – or only meeting the very low minimum repayments so interest and charges quickly mount up.
An example of this kind of situation comes from our client Josh (whose name has been changed), who had a stable job and managed well using 0% credit cards to sometimes cover one off large expenses, like a new boiler, knowing he had the income to comfortably afford repayments. However, a year into starting at a new company, he was made redundant and found himself having difficulty meeting repayments, relying on balance transfers from card to card. He managed to keep up with other bills, but the difficulties saw him build up £36,000 of credit card debt.
