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More people relying on credit to pay for utilities

More people relying on credit to pay for utilities

Category: Debt

Updated: 07/04/2014
First Published: 07/04/2014

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

Not only have consumers had to do battle with ever-increasing utility bills over the last few years, but it seems many could be putting themselves in even bigger financial difficulty by turning to credit to pay for them.

Research from Debt Advisory Centre has revealed that the number of people relying on credit to pay for their utility bills has trebled in the last six months alone. In February, some 18.9% of those surveyed admitted to using a credit card or loan to settle a gas, electricity or water bill, a three-fold increase from the 5% recorded in August 2013.

Arguably it isn't surprising that so many people have started to turn to credit, particularly in the wake of energy prices rising so rapidly. Struggling households might find they simply don't have the spare cash to cover the extra amount, and so use a credit card instead.

However, that short-term solution could easily turn into a long-term problem. Not only will they need to pay off the bill eventually but in the meantime a lot of extra interest could accrue, and that means monthly repayments could start to become unmanageable.

It could be even more difficult for younger consumers, with the survey finding that those aged 25-34 were far more likely to turn to credit – over a quarter (26.3%) of this age group used credit to pay for an energy bill compared to just 7% of respondents aged 55+.

This is a figure that's particularly worrying considering that younger consumers are also more likely to have just taken their first steps onto the property ladder or to have started a family, so adding to their level of debt at such a young age could make it much more difficult for them in the future.

Unfortunately once stuck in the cycle of debt it can be incredibly difficult to get out of, and putting things like utility payments on credit should be a last resort. If you find that you don't have enough money to settle essential bills it could be time to make some changes – you'll want to take a cold, hard look at your budget and might even consider seeking professional advice – but if you're already stuck in the cycle there are things that you can do.

Consolidating all your credit card debts into a single, balance transfer card can be ideal, and with many having generous interest-free periods you'll have plenty of time to pay the full amount off without adding to your level of debt. If you've got larger debts then a personal loan could be a solution, ensuring you'll be completely debt-free after a set repayment term, and of course, if you want to keep your utility bills as low as possible, make sure to thoroughly compare tariffs to keep costs to a minimum.

What next?

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Disclaimer: 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.