By Charlie Kimber
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People borrow £1.5 billion on credit cards as cost of living crisis deepens

This article is over 2 years, 2 months old
The credit card borrowing figure from February is the highest monthly amount since records began
Issue 2799
A pile of credit cards illustrating a story about debt and the cost of living crisis

Working class people are sinking into debt as the cost of living crisis bites

People across Britain are turning to expensive forms of debt to meet the spiralling cost of food, clothing and fuel. Faced with the choice between heating and eating, they are filling the gap by temporarily postponing the pain with a credit card.

Record credit card use is a sign of the strangled living standards flowing from soaring prices. And that’s before the fuel cost increases and tax rises hit at the end of this week.

Bank of England data published on Tuesday showed individuals borrowed a net £1.5 billion on credit cards in February. This is the highest monthly amount since records began in 1993. And it’s almost four times higher than the average of £400 million borrowed in the previous six months.

A survey by the Office for National Statistics found 12 percent of people were using credit cards more than usual in the first half of March. And it’s younger and poorer people who are borrowing most heavily. The proportion using credit cards more often rose to 18 percent for those aged 30 to 49 and to 21 percent among renters.

The average interest rate on credit cards is almost 19 percent a year. That means banks and other leaches demanding crippling payments just as the cost of living crisis worsens. Debt charity StepChange reports a mounting number of desperate people seeking a way out of severe financial problems. StepChanage’s policy head Peter Tutton said, “More and more people experiencing problem debt have problems meeting not just their credit repayments, but also their priority bills.”

In another sign of the pressure on people’s cash, shoppers are increasingly choosing discount supermarkets. Aldi grabbed its biggest share of the grocery market to date and Lidl matched its previous peak, according to the latest figures from the analysts Kantar. And in another sign of trying to stretch cash to cover the bills, the number of people working beyond their state pension has nearly doubled in two years. Investment manager Abrdn says—and it’s hardly a revelation—this is because of rising living costs and insufficient pension savings.

Surveying people planning to retire in 2022, Abrdn found two-thirds proposed to continue with some form of employment beyond retiring. That’s up from just over half in a similar study last year—and only a third in 2020. “Only a quarter of this year’s retirees feel very confident they have saved enough to fund their retirement,” the report said

No amount of careful “investment management” is going to help people who don’t have any money to cover their bills. Instead people will work through exhaustion and pain because their pension is too small. “Gone are the days when everyone had a set date or a set age from which they’ll never work again,” said Colin Dyer, client director at Abrdn Financial Planning.

Bank of England governor Andrew Bailey has warned earlier this week that people face a “historic shock” to their incomes this year. This is the same man who—having grabbed £575,538 last year—last month called on workers not to ask for pay rises during the cost of living crisis. We need to give the Tories and the bosses a “historic shock” with more strikes, protests, riots and occupations.

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