Brits missing out on benefits of using credit
Ten per cent of credit users are more likely to use credit products since the financial crisis; the majority stating they have needed credit more in the last few years as many people struggle to balance their finances, according to new research by MoneySupermarket.com.
The research found almost thirty four million Brits currently use some type of credit product, with 10 per cent of those more likely to use credit since the financial crisis of 2008. Of those, two thirds (65 per cent) stated they have needed to use credit products more in the last few years, 17 per cent are less inclined to use their savings and are resorting to credit instead whilst 11 per cent said it's cheaper than it once was as rates are low.
However, some credit users are more wary of using credit with over a third (34 per cent) stating they are less likely to use it since the financial crisis. By not using credit people are potentially missing out on the additional benefits some products can bring. For example, someone using a cashback credit card for everyday spending and paying off the balance in full each month could earn up to 5 per cent on their spending. Spending £1,000 a month on the market leading American Express Platinum cashback card would earn £225 over 12 months. If you have an existing debt on a credit card at a standard APR, you could switch to a market leading balance transfer card which allows people to spread payments over the term of the deal. For example, switching a £3,000 balance from a card with a market average standard rate of 17.3 per cent to the market leading Barclaycard Platinum credit card offering 22 months interest free on balance transfers would save £696 in interest over the term of the deal.
Kevin Mountford, head of banking at MoneySupermarket.com said: "Prior to the financial crisis, credit was relatively easy to come by and as a result many consumers found themselves in financial difficulty. It is encouraging that as a nation we are showing a more restraint when it comes to taking on new borrowing. However, by avoiding credit completely many consumers are missing out on the added benefits that credit can bring, for example, rewards on offer from cashback credit cards, the ability to consolidate more expensive debt to a personal loan or zero per cent balance transfer card, or repair or create a good credit profile. When used responsibly credit can be a good thing and is an effective way for families to manage their finances. By using a credit card for everyday expenditure but then paying it off in full at the end of the month would not cost a penny in interest.
"However, it's essential consumers understand all the terms and conditions that come with such products and make sure they have the means to repay that debt back in a timely manner. Missing or making a late payment could be a costly move and vitally, could damage your credit rating making it more difficult to access other financial products in the future."