Credit cards are being relied upon to cover household bills by almost 5 million people, according to new findings from moneysupermarket.com.
The reliance on credit cards to cover household bills has been revealed by new research carried out by the price comparison web site. Fourteen percent of adults regularly use their credit cards to meet their everyday cost of living.
Of more concern, however, is the fact that a further 2.5 million Brits use their credit cards to Brits withdraw cash, which is an expensive way of borrowing money and could be costing a total of £90 million each year.
Although using a credit card is a convenient way of settling household bills, unless the full balance is paid off every month, interest rates of 14% or more will be payable, so the costs of living increase month on month.
Those who have an interest free period with their credit card are wise to purchase any big ticket items during that time, however paying off the outstanding balance when the interest free period finishes is important to prevent large interest charges accruing.
Kevin Mountford, head of banking at moneysupermarket.com, emphasises this point;
“Sometimes a credit card can be a convenient way to pay for everyday items, but a rule of thumb is to finance a product over its useful life span. Funding a large purchase such as a TV over the length of an interest free period makes sense, however if you are paying for your weekly shop over several months, this is a real no-no. Those consumers who are turning to credit cards to fund basic household bills on a regular basis should be hearing alarm bells, as this habit needs to be avoided wherever possible – it’s really a case of robbing Peter to pay Paul.”
“It’s no bad thing to use credit cards to help manage your outgoings occasionally but over the long-term, consumers need to be careful that they don’t fall into a debt trap”, Mountford advises.