Most people have a credit card. Credit cards have a lot of benefits. However, the usage of credit cards has soared in recent months, seeing borrowing on credit cards increase at an astounding rate.
According to figures published by the Bank of England, (shown below) the UK has seen the fastest rise in credit card borrowing – reaching 12.5% in June 2022. This is the fastest rise in credit card borrowing in 14 years.
Effects of the cost of living crisis
The cost of living is on the rise. The cost of our everyday essentials such as petrol and food are continuing to rise at a startling rate. To keep up with these rates more and more people are turning to borrowing money on credit cards to pay for their basic needs.
Researchers are warning that the increased borrowing and lack of saving suggests that people are going to continue struggling to cope with the increasing cost of living. People are seeing an easy, quick solution would be to borrow on a credit card. And there will only be a greater need as we head towards the colder months.
New predictions show the average energy bill could shoot up to £3,582 this October. Laura Suter, the head of personal finance at AJ Bell has warned in her article that this “is just the tip of the iceberg”. She suggested that “Once the energy price cap shifts up again in October and we all use more energy in winter, these figures will keep climbing”.
Inflation increases the need for borrowing
Inflation in the UK hit 9.1% in May, the highest level in 40 years.
Since then, it has risen to a further 9.4%. It is expected to climb even higher by the autumn. However, wages are not keeping up. The average wage only grew at an annual rate of 4.3% between March and May, according to research. With this, it is becoming unbearable to keep up and consumers are becoming desperate.
It is understandable that credit card borrowing is on the rise. But this shouldn’t be the last resort for consumers. It’s an easy trap to fall into as it looks as though it is a quick solution. If you can pay back the money borrowed, it could be a viable option for you. However, with the massive increase in credit card borrowing, people need to be wary of building up debt.
IGsend from Income Group enables payroll teams to make instant payments, 24/7 365 days of the year using our Faster Payments system.
Instant payments would mean consumers would get their money quicker and would be able to budget more efficiently. Removing the need to borrow until their next payslip as they will be able to get their payments in real-time, and in turn, become less reliant on the use of credit cards.