A new study shows that a worrying number of Brits are becoming increasingly dependent on credit, and as a result, 11% have maxed out one of their credit cards. This overreliance on credit can cause many problems down the line, which in the worst cases can see people forced to move out of their home or declare bankruptcy.
Consumer Intelligence's data reveals that nearly one in six adults rely on their plastic friend(s) for financial survival, which means that maxing out a card could be a real concern for many, especially as it would make any further borrowing even harder.
And indeed, of the 80% of Brits that own a credit card, 31% juggle three or more cards to try and cope with their living expenses, while 19% cannot go a month without using their plastic. Clearly the combination of stagnant wages, rising inflation and increasing bills is taking its toll.
That's why it may be unsurprising to find that 42% of adults worry about unsecured debts, with 11% admitting they worry a lot about how deep in the red they are. And it's not just credit cards that are causing stress, with 17% having exceeded their agreed overdraft limit in the past three years.
Overall, 18% of respondents admitted they have debts of £10,000 or more (not counting mortgage debt), while one in four owe at least £5,000. Debt problems are affecting people from many socio-economic classes, too, with 16% of those who earn more than £35,000 a year relying on credit cards, and 10% of these higher earners having maxed out a card. Even 23% of adults with a household income of more than £50,000 do not always manage to clear the debt on their credit cards.
Given interest rates on credit cards can be rather high, it's always better to clear credit card debt as soon as possible, but for those that may not manage to do so all of the time, a 0% interest credit card could offer some respite. If you really need a credit card, at least try to make sure it's the most competitive one possible for your needs.
Considering that too much debt is a good way to kick-start a financial crisis, as we know from recent history, Bank of England figures that show a total unsecured debt across credit cards, car loans and overdrafts of £198 billion – the highest level since the 2008 financial crisis – should concern everyone.
Ian Hughes, chief executive of Consumer Intelligence, said: "The alarm bells have been ringing all year with the Bank of England warning that personal debt levels have been rising at the fastest rate since 2005.
"It is a major concern when millions of people admit to being worried about how much they owe and so many are relying on credit cards to tide them over each month. Borrowing makes sense for many when interest rates are low but it is essential people have a plan to repay their debts not least to reduce the stress millions are facing."
To help them cope with debt, 19% of respondents said they've had to borrow money from family or friends in the past three years. If you can't rely on family or friends to help you cope and reduce debt, however, there are still other options. There are agencies such as the Citizens Advice Bureau that can help you deal with debt, or you could start by reading our 12-step guide to getting debt-free.
While getting a new credit card may be a risky temptation, getting a top 0% balance transfer credit card – or even a fee-free version – could help you consolidate and pay off your debt before you'd have to start paying interest. However, this can only work if you cancel and cut up all your other credit cards after you've transferred the debt over, and don't incur any new debt while paying it off. Easier said than done.
If you've accumulated too much debt to put on a single 0% interest credit card, consider consolidating all your debt in an unsecured loan. Interest rates on loans are currently still low, so if you can manage to avoid racking up more debt and make it work, it could be a good way to become debt-free. Just remember that you can always ask for help, as there are plenty of organisations that understand and want to help you become debt-free.
Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.