Have you found yourself spending more money over the last few months than you did throughout the entire lockdown? If so, you’re definitely not alone! Around the UK, consumers have once again been reaching for the trusty credit card as their spending habits have changed.
A survey by Hargreaves Lansdown reveals that over the last few months, Brits have borrowed £700 million in consumer credit! Furthermore, £600 million of this was borrowed on credit cards, which means that credit card debt is down just 3.2% this year.
Could this mean that the savings habits we adopted over lockdown are out of the window? Here’s how UK money habits have changed post-lockdown.
[top_pitch]
Credit cards have made a comeback
Over the last few months, credit cards have made a significant comeback with Brits borrowing £600 million in September and October 2021. This is in stark contrast to what was seen during lockdown when Brits managed to pay off credit card debts at the fastest rate since records began.
As well as this, new savings in the UK have dropped to £5.5 billion. This signals a sharp turn away from the saving habits we adopted during the height of Covid-19. During this time, Brits built up the second-highest savings levels since 1963.
It seems that the costs of post-lockdown life are taking their toll. Brits who previously preached budgeting and saving money are now relying on borrowed credit to fund their newfound freedom.
Causes of the spike in consumer credit
It is no coincidence that the popularity of credit cards has shot up over the last few months. According to Sarah Coles, Senior Personal Finance Analyst at Hargreaves Lansdown, it is the ‘spending squeeze’ that has thrown saving habits out of the window.
The spending squeeze refers to the huge increases in the cost of living that Brits have faced since emerging from lockdown.
[middle_pitch]
Rising inflation
In October, CPI inflation rose to 4.2%. This means that the average price of goods consumed by each household in the UK rose by 4.2%. As a result, Brits have found themselves spending more than they did previously on everyday essentials.
Most people don’t factor inflation into their budget plan. Because of this, many Brits who used to save each month can quickly find themselves at a loss and unable to make monthly savings.
Post-lockdown temptations
No one can deny feeling a little caged-up during lockdown. For this reason, it is understandable that much of our recent spending has been on social activities that were put on hold during the pandemic.
The nationwide lockdown sparked a serious wave of FOMO, which has caused many Brits to fill their social schedules with as many activities and opportunities as possible. This all comes at a price! The average night out with friends in the UK can cost anywhere between £60 and £100 and many Brits are doing this two or three times a week.
Christmas came early this year!
If the toilet roll panic of 2020 taught us anything, it’s that stock can sell out quickly! As a result of concerns over shelf shortages, many people have started their Christmas shopping early this year.
While these keen shoppers may have been saved from stock issues, the early Christmas shopping saw a surge in credit card purchases. As well as this, one in 10 Brits will be using ‘buy now pay later’ schemes to fund their buying splurge as Christmas approaches.
Unappealing savings accounts
Perhaps a big part of the problem is that UK savings accounts are experiencing a slump. According to Hargreaves Lansdown, the average easy access savings rate is stuck at a record low of 0.09%.
For many, this makes saving into an account seem pointless. Instead, Brits would rather get instant gratification by purchasing consumer goods or spending their money on social activities.
The financial demands of post-Covid life outweigh the interest that is offered by savings accounts. This has made it appealng for Brits to ditch their savings and spend, spend, spend!
