How do Brits use their credit cards - and how should you?

By Marianne Curphey


What do we Brits most use our credit cards for - treats or essentials? And how can we strike a better spending balance?

A February 2017 survey by financial company Tilney found that older Brits spend more on leisure and recreation, while younger people prioritise downloading music, cinema tickets and takeaways. Since Brits are increasingly using credit to pay for purchases, it's not a jump to assume that a good deal of that spending is being charged.

The study also noted that emotions - positive and negative - often drive our spending decisions.

Here's a look at the study's findings, and advice on how to strike a better balance with your spending.

How do Brits spend as a whole?
Tilney estimates that the average 20-year-old's household spending will reach £1.9 million over the course of their lifetime (in 2017 prices). By the time today's 20-year-olds reach 50, they'll have spent their first £1 million.

Over one's lifetime, spending changes. People between the ages of 65 and 74 spend the most on recreation and culture - a quarter of their spending each year goes toward these categories. In contrast, people under the age of 30 see their spending dominated by housing costs.

These younger Brits spend less on recreation, but not by much. This age group's recreational spending accounts for about a fifth of their spending.  

Emotions play a large role in our spending habits as well, the study found. Brits spend more when feeling upbeat, such as after receiving a promotion, or sad, such as after the death of a loved one.

Generational spending and debt
Jane Cox, an international human performance specialist and wealth psychology expert, says the generational spending differences mesh with her findings on how Brits get into debt.

"Generally speaking, British people tend to get into debt in small ways, building up debt incrementally, rather than massive splurges," she says. "It's telling that young people opt for instant rewards, such as downloading music and going to the cinema, whereas older people are keen to spend their money on experiences.

"They've worked out what is important in their life, and decided it doesn't have a lot to do with what you physically own."

Giving better direction to your own spending
How can you strike a better balance between needs and wants with your expenses and charges? Experts suggest taking these three steps:

1. Sort out your financial priorities.

Spending depends greatly on the individual, but life demands cause shifts. Alex Hedger, clinical director of cognitive behavioural therapy clinics at Dynamic You, says supporting a family is one example of a life change that alters spending priorities. 

"Usually people's behaviour will match their life values," he says.

2. Determine what spending provides you the most joy.
"Psychologically, we know that consequences from a behaviour shape whether we are more or less likely to do the same behaviour again," Hedger says. "Where there is a reward for spending - or saving - we are more likely to do it again."

 "We use something in our education sessions called the Happiness Index," says Heidi Allan, head of insights and engagement at Neyber, which offers employees low-cost loans repaid by salary deduction and free financial education in their workplace.

"We ask people to list everything that they have purchased that is of significance, for example anything worth more than £100 over the past year."

3. Focus on purchases that provide the most value.
Review this list detailing your spending, Allan says, and think about whether your purchases have been worthwhile versus how much they resulted in your enjoyment.

"Are you still using some of the things you bought in the past, and do you still get a sense of satisfaction from it?" she says. "These are the questions we ask people. Has the way you have spent your money made you happy?"

Why it's important to know your spending behaviours
So how can we change our spending behaviour? Hedger says it hinges on the rewards or consequences from our actions.

"Exploring any rewards or punishments you receive from certain behaviours can be a way to undermine reinforcing undesired behaviours, whilst bolstering desired ones," he says. This can help to reduce emotional spending or retail therapy.

Getting people to look at their spending and the value they gained from it is a useful tool in educating people about money and helping them discover its real value, Allan says.

Once you recognise what makes you happy, you can use your money in more constructive ways, she says. This helps people to identify what they have used and enjoyed, and how to structure their spending so that it is enhancing their life.

See related: Are you catching bad money habits from friends?, 'Buy now, pay later' offers can leave you with debt headache

Published: 25 May 2017