Rampant inflation leads more to tap into their overdrafts
The percentage of British consumers relying on overdrafts has risen by 7.1% since August 2021, according to new figures from the credit marketplace ClearScore, coupled with an increase of 6% in the proportion of income they spent on essentials during that time span.
Furthermore, a survey of 2,000 people conducted for ClearScore by Opinium in November indicates that the overdraft “borrowing” could stretch well into 2023, with 25% of respondents saying they would probably increase their reliance on overdrafts for the next six months. This comes as 63% said they had cut back on non-essential spending.
Overdraft dipping likely to continue
Justin Basini, chief executive of ClearScore, said: “Understandably, many more of us are dipping into our overdrafts and using credit generally as the cost of living continues to rise and our income doesn’t stretch as far as it did before. With Christmas approaching and energy bills causing ongoing concern, this trend looks set to continue.
“Encouragingly, however, many people do seem to be balancing this greater dependence with action to cut costs where they can, to make their money go further. Looking for small, simple changes – such as consolidating debt or cutting back where you can – will be hugely important to keep problem debt to a minimum this new year.”
More consolidating debt and using savings
Citing data from its open banking technology and 20,000 accounts, ClearScore said that people were spending 25% more on essentials such as rent, groceries, and fuel bills even though growth in wages for many was hovering around 10%.
Many of the survey respondents (52%) were worried about how they would cope financially in the coming months, with 23% saying they feared losing their jobs. Nearly a quarter (24%) expressed concern about being able to pay the rent or mortgage.
Some were resorting to overdrafts while also planning other strategies, such as consolidating existing debt (30%) and using savings to pay household bills (43%).
Nearly 40% said they would look for sources of additional income. And 43% planned to cancel subscriptions. With that in mind, YourMoney.com reported yesterday on how to get rid of subscriptions you no longer want or use.