Over 12m Brits use credit card to fund day to day living

By Elliot Wright, 20th January 2010

The recession has left millions of Brits depending on credit to fund everyday expenses, according to the Post Office Consumer Credit Report.

The report reveals more than 12 million adults in the UK intend to use their credit card in January for daily purchases such as grocery shopping - an increase of 2.6m on last year - reflecting the extent of the damage the recession has inflicted on people's finances during 2009, with many more set to suffer well into this year.

Adding to this financial pressure is the extra time many people will have to wait for their January pay as many were paid early before Christmas - causing more and more people to resort to any means possible to fund their living costs in the New Year.

The increase in credit spending is also expected to last throughout the rest of the year, with a further 3.3m people expecting to spend more on their credit cards overall in 2010 than last year. Three per cent plan to take out an additional card or increase their credit limit.

The report also revealed a new trend in credit card usage. Where credit is traditionally used to purchase 'big ticket' items, 3.5m people have said they expect to spend less on their cards but use it more frequently on a day-to-day basis.

3.3m people expect to spend more on their credit cards overall in 2010 than last year

With some credit card providers charging up to 39.9% interest, the Post Office is urging people to ensure they are on the best possible deal to avoid paying over the odds for money borrowed on their credit cards.

Those who fall behind on credit card repayments can incur credit card charges, making it even more difficult to pay off the debt.

Post Office head of lending, Az Alibhai said: "It's understandable that people may want to use credit cards to fund more expensive purchases, particularly at the beginning of the year when many are still feeling the pinch from Christmas, but the continued trend for people to rely on their cards for basic day-to-day purchases is a concern.

"Whilst the recession has left many with no choice, these debts build up quickly if not paid off in full each month, and can be extremely costly over time when interest is added.

"For those reliant on credit it is still worth shopping around, especially if you have a debt on your card that charges a high APR.  By taking advantage of any zero per cent features still available or by switching to a card that will charge you a lower rate of interest, you can pay your debt off more quickly and cost effectively."

Claims Financial