Credit cards plug post-Christmas pay gap

Over 11.5 million people (34 per cent of credit card holders) spent the first month of 2011 relying on their credit cards to fund day-to-day living costs, according to the fourth annual Post Office Consumer Credit Report.

Also, 43 per cent of credit card holders used their cards for grocery shopping - which generally make up a substantial part of regular outgoings.

One in ten (10 per cent of those using their credit card in January) said they needed to use their card to see them through the long gap to the January pay day - the only time of year when monthly salaries have to stretch up to six weeks.  More than one in ten (11 per cent) said they needed their card to cover overspend on Christmas purchases. A third (33 per cent) admitted to relying on their credit card to get through every month anyway.

Looking at credit card usage throughout the year, while half (52 per cent) of credit card holders expect to spend the same as they did during 2010, over 2.4 million (seven per cent) said they expect to spend more on their card during 2011.  32 per cent expect to increase spend by up to £100 extra per month, and 17 per cent said they would potentially add up to £200 monthly.

More than half (56 per cent) plan to pay off their bill in full each month to avoid paying any interest charges, but seven per cent estimate it will take them more than three years to entirely clear their credit card debt.  39 per cent said they will need to budget more carefully throughout 2011 as a result.  When bills are not paid off each month, the additional charges from interest can significantly add to the overall debt.

The survey also found that many people own more than one credit card - with one in five (20 per cent) men having three or more.  Londoners are the most likely to carry more than one card, with 24 per cent of those in the capital having three or more.  With many providers offering interest-free balance transfers for a set period, people with debts spread across different cards may benefit from consolidating their debts on to one card to make them easier to manage and to reduce the amount of interest being paid.

Post Office Head of Credit Cards Az Alibhai said: "January has been a tight month for many of us, especially with the long wait until pay day, and we can see that many people are falling back on credit cards to ease the costs of day to day living. If the debt is managed sensibly and paid off quickly, this can be very effective. However, if you don't pay off the bill in full, it can be a pricey way to fund daily purchases.

"With many people expecting to increase their credit card spend this year and to help customers manage their finances during the ongoing post-Christmas pinch, we urge cardholders to check out their interest charges and consider switching to a deal with a zero per cent offer on purchases and balance transfers.  The Post Office Credit Card offers competitive rates of interest as well as zero per cent on balance transfers for 12 months and unlike many other cards, has no charges when making purchases overseas."

The Post Office Credit Card offers zero per cent on new purchases for the first three months.  Customers also benefit from zero per cent on new balance transfers for five months for the second and third year.  It offers no cash advance or handling fee when purchasing foreign currency (either online or in a Post Office branch).  Applications can be made online, over the phone, or in-branch.

To find out more about the Post Office Credit Card, visit postoffice.co.uk.