We’re living in a consumer society. There’s no getting around it. And the truth is that in the UK today we need to spend money in order to get by. For many us, this means resorting to credit cards. But is this really the best solution? Recent research by the Financial Conduct Authority found that it was common for people to still be in debt even after paying off a credit card entirely. We’re going to look at the reasons why this is happening and we’re going to discuss potential solutions, answering the question above.
Why Are Consumers Trapped in Credit Card Debt?
The main reason that people stay in debt is because they pay off their credit cards by shifting that debt to another card. In other words, they are simply juggling their finances, often taking out many cards at once and having multiple pockets of debt. There are also economic factors involved, including the following:
- Household earnings have remained stagnant across the UK;
- The inflation rate has climbed to record levels and continues to rise;
- Imports have become more expensive as the pound has weakened following the Brexit referendum.
As can be seen from these three factors, spending power is down across the UK. And with this in mind, it is understandable that consumers are trapped in a cycle of debt. Another element contributing to their use of credit cards is the easy availability of the cards themselves. Cards are available with a low annual fee or even with no fee, and many can be obtained with bad credit. What this adds up to is a general overabundance of credit cards.
Credit Card Alternatives
The simplest way for consumers to avoid paying off a plethora of credit cards is to consolidate all of their debt through a company such as Likely Loans. This saves on the time and effort needed to service multiple lenders, allowing people to focus on work and family commitments instead of their debts.
Another way that consumers can avoid overreliance on credit cards is to create a household budget and stick to it. This involves prioritising as well as planning. A maximum amount should be set that can be spent each month in order to ensure that income meets expenses. The idea is to reach a point when it is possible to save money every month and create a buffer against future debt.
While it is true that credit card debt is increasing in the UK, and this is often due to broader economic reasons, individuals do have some power when it comes to handling their debts.