Debt problems hit record high
The number of people seeking help with debt problems has hit a record high already in 2016, according to new research from StepChange.
Figures released by the debt charity today, show that over 300,000 people sought advice from it between January and June, the highest half-year number the charity has ever seen.
Those contacting the charity in the first half of the year were struggling with a total of £2.4 billion in unmanageable debt and owed an average of £13,826 each, with credit cards, overdrafts and personal loans the most common source of debt problems.
- Read how to Climb out of debt in 2016.
Three in ten (29%) of those contacting the charity did not have enough money to pay their essential bills and credit commitments each month.
StepChange says those affected were increasingly likely to be younger (59% of the charity’s clients are under 40 and there’s been a “steady rise” in clients under 25), working part-time (19% of the charity’s clients work part-time) and renting their home (77% of StepChange’s clients are renters).
However, the figures show some respite for struggling households as the number of people in arrears on essential bills, such as rent, mortgages, utilities and Council Tax, has stabilised after years of substantial increases.
- Use the Top 0% credit card and balance transfer deals to cut the costs of debt.
Mike O’Connor, chief executive of StepChange Debt Charity, says the Government needs to do more: “If we are to help people and their families get back on their feet and contribute to a growing economy, the Government needs to take the issue of personal debt seriously.
“The Government has said that it will review proposals that would see people seeking debt advice given ‘breathing space’ – time during which interest and charges would be frozen and enforcement action halted whilst people try to get back on their feet. The increasing numbers of people seeking our help shows that people who are struggling need help and the Government must now take action which is long overdue.”
Used by the holder to buy goods and services, credit cards also have a monthly or annual spending limit, which may be raised or lowered depending on the creditworthiness of the cardholder. But unlike charge cards, borrowers aren’t forced to pay the balance off in full every month and, as long as they make a stated minimum payment, can carry a balance from one month to the next, generating compound interest. As the issuing company is effectively giving you a short-term loan, most credit cards have variable and relatively high interest rates. Allowing the interest to compound for too long may result in dire financial straits.
Moving money from one account to another, whether switching bank accounts or more likely transferring the outstanding balance on your credit card to another card that charges a lower – or 0% – rate of interest. Some card providers may charge a transfer fee that can be a percentage of the balance transferred.
“Arrears” tend to be associated with debt. If you fall behind and miss payments on any outstanding debt, the amount you failed to pay is an arrear – the amount accrued from the date on which the first missed payment was due.