23 Jan 2019 UK adults are starting 2019 with outstanding borrowing from 2017, with 3.1 million people still paying for Christmas 2017.
The new study from Sainsbury’s Bank Credit Cards found more than a quarter (27%) of people have debt remaining from two years ago. This New Year, UK adults still owe money from 2017 shopping (8%), holidays (8%), cars (7%) and Christmas (6%), showing it’s not just the latest festive season which is having an impact on UK household budgets.
On average people hold their debt to one credit or store card. However a significant 28% of spenders have debts on two or more cards. For 2019, two in five (40%) people like the idea of consolidating all their debts together, but only 6% plan to take advantage of this.
Consolidating borrowing for example onto one credit card, (particularly a 0% balance transfer card) can be a good way to manage re-payments as it lets people keep track of all their borrowing in one place. It should enable them to stop shelling out on interest payments and allow them to focus on reducing the debt. They should also set up a monthly direct debit for more than the minimum payment to ensure they’re paying off the debt, and they can also top up as and when they can afford to. It’s important people pick a card with a 0% balance transfer period that’s realistic in terms of how long they think it will take to pay back the borrowing.
Difficulty sticking to budgets is a contributing factor to people’s increasing levels of debt. Whilst many people have great intentions to budget – more than half (54%) of people set a financial plan in 2018 – only 28% managed to stick to it. In fact nearly a quarter (24%) of people admitted going over budget last year and only 1% of the population was under their 2018 financial plan.
The card spending from 2018 that’s contributing to 2019 card balances are everyday shopping (49%), Christmas (41%) and holidays (30%). Despite this, only 25% of people intend to set themselves a spending budget for 2019.
Borrowers believe it will take 12 months on average to clear their balance. One in 10 (12%) of those with outstanding debts think it will take longer than a year to get back into the black, indicating that Christmas 2019 may be an outlay well into 2020.
Jerome Fernandez, Head of Credit Cards at Sainsbury’s Bank, said: “We are committed to providing customers with products which can help them manage their borrowing. Customers can take advantage of 0% on balance transfers for up to 30 months, enabling borrowers to consolidate outstanding debts and focus on clearing their balances.”
Sainsbury’s Bank offers five top tips on dealing with debt
1. Make a list of all debts. Understanding the true picture of how much you owe in total is the best start to feeling in control of your outstanding payments.
2. Check interest rates. Make sure you know how much interest you are paying on each of your debts and consider moving it to a 0% balance transfer credit card so you can focus on paying down the debt.
3. Consider consolidating debts. If you have debt from more than one lender, consider consolidating these debts into one product. This will be easier to keep track of and should mean you pay less interest on the overall debt.
4. Check your outgoings. Are there regular items you are paying for that can be reduced while you are focused on paying off your debt? For example a gym membership could be replaced by joining a free fitness boot camp in your local park. The money you save can go towards driving down your debt.
5. Speak to professionals about debt. Debt can be an emotional issue and there is help available through charities such as StepChange that can help you take the first steps to managing debt.
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