According to the ONS’s latest inflation figures, the Consumer Prices Index (CPI) rose by 6.2% in the 12 months to February, up from 5.5% in January. It’s expected to continue to increase, which is likely to be confirmed in the next CPI report, which is released on 13 April.
Low-income households are feeling the pressure, resulting in increased borrowing to make ends meet. Experts are warning that the more people continue to borrow from expensive forms of lending, the higher their chances of drowning in debt down the line when repayments are due. Here’s what you need to know.
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How much has credit card borrowing risen?
Data from the Bank of England shows a £1.5 billion jump in credit card borrowing in February to £59.5 billion. In fact, this rise pushed the annual growth rate of credit (including other forms of borrowing, like car dealership finance and personal loans) to £199.5 billion.
Due to the cost of living crisis, it’s expected that the Bank of England’s next Money and Credit report on 4 May 2022 will show a further rise.
How can you avoid drowning in credit card debt?
When times are tough, debt can be hard to avoid. Here are three tips to help you manage the credit card debt you have.
1. Compare and choose your credit cards wisely
It’s crucial to understand how credit cards work and calculate credit card interest and fees correctly. This way, you’ll be able to compare different credit cards and deals and choose the right credit card for your individual needs.
You can apply for more than one credit card if you’re eligible. This is worth considering as different credit cards may be better suited for specific circumstances. For example, a travel credit card might be better when on holiday as it helps you avoid high foreign transaction fees.
The Motley Fool has listed top-rated credit cards ideal for different circumstances. Compare them to ensure you’re on the most suitable deal. And if your current credit card is too expensive, you can always consider a 0% balance transfer credit card to help ease your financial pressures.
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2. Reduce your expenses
Review your outgoings to identify anything you can forego, even for a short period. Of course, you can’t do without essentials, so that’ll undoubtedly mean looking to do without luxuries. You might consider switching to cheaper stores for your essentials or switching to more affordable utility providers – though options for the latter are understandably limited at the moment.
Also, check whether you qualify for any government benefits. They could help you reduce your outgoings, allowing you to use the money saved to pay off your debts quicker.
3. Increase your income
If you have some time available, the simplest way to go about this is to start a side hustle. The extra income can go a long way towards helping you pay off your debts quicker and developing your financial resilience, especially at times like these when inflation is high. The following articles could give you a head start on your quest to find the perfect side hustle for you:
