Credit Card Payments Contribute to Pre-Payday Blues

MORE than four in ten UK adults run out of wages before payday, research from insolvency body R3 has revealed.

Of those who said that they often or sometimes ran out of cash before the end of the month 35% said that having to make credit card payments contributed to the struggle to make wages last.

Credit card repayments were the biggest single problem identified by respondents to R3′s survey although overspending on going out (20%) and making payments on bank loans, mortgages or ‘big ticket’ home items (15-17%) were also mentioned.

R3′s President Steven Law said of the results, "Our addiction to credit cards is still out of control, despite the recession and a ‘tightening up’ of lending criteria. There needs to be a cultural shift in consumer attitude to debt…

"Using a credit card is just delaying the inevitable day of payback – the sooner this is tackled and professional advice sought, the smaller the final bill will be for individuals."

Cutting costs

Of the 42% that told R3 that they ran out of money before their next pay day, 11% said they did so on a regular basis while 31% said they only did so occasionally.

As bad as it is to run out of cash as a result of making credit card repayments is, though, the consequences of missing credit card repayments can be worse in some ways: lenders charge a fee for the missed payment – usually £12 – and the problem will be recorded by credit reference agencies.

This makes it vital that credit card holders cut costs rather than letting their debts linger unattended.

This could mean making sacrifices elsewhere. For those with credit card balances accruing interest, 0% balance transfer credit cards could help.

After transferring a balance, consumers can just pay the original debt rather than paying back the interest charges.

On average, those who run out of money throughout the month do so on the 20th day after payday, according to R3′s research.

Most credit cards have an interest-free period of forty to fifty days which could suggest that consumers are getting into a vicious cycle of spending: putting money on their cards to cover the end of the month only to run into trouble when making the repayment again in the next month.

One solution to that is using 0% purchase credit cards to spread the cost of one expensive month over a number of subsequent months.

Source: credit-card-comparison-online.co.uk