One in four credit card borrowers has paid their monthly bill late – two thirds of them in the past year – as growing numbers struggle to keep up with their debts, new research reveals.
Fewer than half of credit card users regularly pay off their balance in full, according to price comparison website Compare the Market. Soaring mortgage or rent, food, energy and fuel costs have piled the pressure on to household budgets, with the average credit card debt now reaching £1,160.
The UK economy slipped into recession in the second half of 2023, as households cut back on spending to address struggling finances.
One in five credit card borrowers have only been able to make the minimum repayment on their most recent bill, Compare the Market finds.
Credit card holders spent the most on online shopping and holidays, with 16 per cent of borrowers applying for a new card before travelling abroad.
Struggle: One in five credit card borrowers have only been able to make the minimum repayment on their most recent bill
Searches for credit cards and loans soared by 83 per cent between December and January as families tried to bring their outgoings back under control, according to credit check firm ClearScore. Andy Hancock, chief growth officer at Compare the Market, says: ‘When taking out a credit card you have to be mindful of not borrowing more than you can afford.
‘It’s worthwhile paying off your credit card balance in full every month to avoid paying interest.’
Credit card APRs (annual percentage rates) have rocketed in the past year, stinging those who can’t pay off their balance in full with the highest interest rates since records began in June 2006, analysis from rate scrutineer MoneyfactsCompare shows.
A typical new credit card deal now has an APR of 34.7 per cent, up from 30.3 per cent a year ago.
A borrower with the average level of credit card debt of £1,160 who only makes the minimum repayment each month and is charged a typical APR would now have paid £943 in interest by the time their balance is paid off.
Four in ten borrowers now believe that the length of a 0 per cent offer when transferring their balance to another card is a key feature when choosing a new credit card.
And 21 per cent say just having the ability to transfer a balance from an old credit card is important, as more than one in three previously used a balance transfer card to avoid paying high interest rates.
When looking for a new card, you should use an eligibility checker to determine whether you are likely to be accepted before you formally apply because a rejection could harm your credit score.
Check whether cards have annual fees and charges, and mark the end of any introductory interest rate in your diary to avoid receiving a shock bill.
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