It has come to light that in recent years, shoppers are tending to use their credit cards for day-to-day spending rather than for just one-off purchases, claims the City Regulator.
There is far greater protection which is offered when buying a bigger purchase with a credit card, coupled with the added bonus of loyalty points. This has led to the increase in use, according to UK Finance.
They went on to claim that credit card spending has been a dramatic rise of 12.1% in October 2018 compared to October 2017.
Debt Charities Warn Against Credit Card Use.
Debt charities have issued warnings about credit card spending and the use of it on a day-to-day basis. They have said that people risk financial difficulty if they build up their spending on credit cards. If they were to be faced by a financial emergency, such as a long-term illness, they could very much struggle to make the repayments and then are at risk of facing high interest charges.
How Much is Spent Using Credit Cards?
Interestingly, over the last year there has been an outstanding level of borrowed on cards which are issued by high street banks, growing by 5.7%, UK Finance has said. The total collective spending on these bank-issued cards was £11.3 billion in October of this year.
The total spent on all cards, not just bank-issued ones, was more than 17 billion during October too.
In addition to this, it was found that there were 290 million purchases made using a credit card in the month of October. On average, that is a value of £53 per purchase.
This reflects the obvious growing preference of customers to use their credit card to make day-to-day purchases. Whereas, the common trend in the past was using credit cards to make bigger or one-off purchases, or paying for things like a holiday.
It also shows that people are viewing credit cards as a form of payment rather than a form of borrowing. When, technically, spending on a credit card is not spending your own money – it is the banks money.
Recent studies conducted also found that people were far more comfortable using credit cards, rather than they are using debit cards, when they are making purchases online. The way reason for this is to avoid scamming online.
For those with bad credit histories, even getting hold of a credit card can be a challenge and those that can, may be charged credit card rates as high as 36% APR, compared to the 0% to 18% for good credit card customers.
In times of need, borrowers can turn to loans for bad credit which can involve adding extra security to your application including a guarantor or collateral such as a vehicle or property.
Struggling to Save.
It has also been found that while spending on credit cards has risen, people are struggling to put money aside into their savings account. In fact, 60% of those who had not saved did not have the money to spare at all and there are approximately 10 million people in the UK who live with debt.
Whilst those struggling to save will always be recommended to budget effectively, this is sometimes easier said than done. Simple money saving tips include walking instead of taking public transport, managing your food bill more effectively and borrowing clothes from friends and family.
Besides this, there are a number of free debt charities who will be able to assist you with your ongoing finances including Citizens Advice Bureau, Money Advice Service and StepChange. There are also government initiatives that can assist too.