362 days in recession have left millions of people starting the new year reliant on credit for day-to-day living costs, according to the third annual Post Office Consumer Credit Report.
The report reveals more than 12 million adults (38 per cent) intend to use their credit card in January for daily purchases such as grocery shopping - an eight per cent increase on last year - reflecting the extent to which the recession impacted on people's finances during 2009, with many more set to suffer financially well into 2010.
Adding to this financial pressure is the additional time many people will have to wait for their January pay, especially if they were paid early before Christmas. As people resort to any means possible to fund their living costs during January, unsurprisingly 2.6 million people expect they will end up spending more on their credit cards this January compared to January 2009.
And it's not just in January when people believe they will feel the pinch; a further 3.3 million (10 per cent) expect they will spend more on their credit cards overall in 2010, with three per cent planning to take out another
credit card or increase their credit limit.
The report also revealed an emerging trend in credit card usage, as more people switch from using credit cards just for ‘big ticket purchases', but for smaller items too.
For example over 3.5 million card holders (11 per cent) plan to spend less on their card, but say they will use their cards more frequently to fund day-to-day costs during 2010.
When it comes to repaying credit, the recession has also impacted consumer habits. Almost half of all credit card holders (45 per cent) have no plans to pay off their credit card bills in full each month and six per cent will only pay off the minimum amount. A further one in five (19 per cent) believe it will take them over a year to pay off their credit card debts.
With some providers charging as much as 39.9 per cent interest, the
Post Office is urging people to ensure they are on the best possible deal to avoid paying over the odds for money borrowed on their credit cards.
"It's understandable that people may want to use credit cards to fund more expensive purchases, particularly at the beginning of the year when many are still feeling the pinch from Christmas, but the continued trend for people to rely on their cards for basic day-to-day purchases is a concern,” said Post Office head of lending, Az Alibhai.
“Whilst the recession has left many with no choice, these debts build up quickly if not paid off in full each month, and can be extremely costly over time when interest is added.
"For those reliant on credit it is still worth shopping around, especially if you have a debt on your card that charges a high APR. By taking advantage of any zero per cent features still available or by switching to a card that will charge you a lower rate of interest, you can pay your debt off more quickly and cost effectively."
