One in five need over a year to clear debts

By UK CreditCards.com

A significant proportion of Britons have outstanding credit card balances and many will need several months to clear their debts, according to new research from credit report firm Equifax.

debt-hardship

The company surveyed members of its credit report service earlier this year and has now provided a snapshot of the country's card debts.

Here, CreditCards.com takes a look at the findings and considers how consumers may best be able to manage their balances.

Majority of Brits use credit cards
Equifax's survey of 2,380 adults confirmed that credit cards are a regular fixture in most Britons' wallets.

According to the survey, 91% of respondents use credit cards and more than one in five own at least three cards. Nearly two-thirds (63.1%) of respondents said they use their credit cards for everyday living expenses.

Using credit for regular purchases can be a sensible approach for those who pay off their balance in full each month, as good credit management will be reflected in a person's credit rating.

However, the high number of people with outstanding debts suggests that many people currently have little choice but to use their cards for everyday spending, even if they struggle to clear their balance at the end of the month.

One in four owe between £1k and £5k
The Equifax research revealed that nearly a quarter of respondents (24.6%) had an outstanding balance of between £1,000 and £5,000 on their credit cards, with nearly three in 10 only managing to pay off less than 25% of their balance each month. Researchers also found that more than one in five people expect to need more than a year to clear their credit card debts in full.

Neil Munroe, external affairs director at Equifax, said that credit card debt seems to play a "fundamental role" in day-to-day family finances.

"With inflation continuing to rise, it's not surprising that many families need to resort to using their credit cards for more and more living expenses," remarked Mr Munroe. "But we believe this does highlight just how important it is to keep on top of credit commitments overall."

With inflation continuing to rise, it's not surprising that many families need to resort to using their credit cards for more and more living expenses.      

Brits with large debts could benefit from balance transfers
Consumers who expect to take several months to pay off their debts could find themselves paying large amounts of interest, as many credit cards have high APRs.

These individuals could benefit from comparing credit cards and applying for a balance transfer card. A number of cards offer 0% balance transfer periods for several months, enabling people to move their debt on to the new card and pay it off in monthly instalments without accruing interest.

However, if the debt is still not paid off by the end of the balance transfer period, cardholders should consider moving the balance again, as the interest rate may be higher than average once the card has reverted to its standard APR.

See related: Survey: Brits 'more committed to spending than saving'; Number of cash-strapped Brits at all-time high

Published: 13 October 2011