Credit card debt has risen by 6.2% from the previous year, according to the Bank of England, after a staggering decline over 2020 and 2021. Consumer credit is climbing, and it looks like it’s only going to continue to rise.
But why are people spending so much now?
Simply put, it could be down to inflation. If things cost more, people will spend more.
Since the beginning of 2022, we’ve already seen a massive increase in bills for Energy and an increase in Petrol.
The Bank of England estimated that the rate of inflation will rise to around 6% early this year, after it rose to 5% at the end of 2021. This could be devastating to many households who are still facing repercussions from Covid 19.
As prices increase, many people will be forced to turn to credit to make ends meet. This could be why we are seeing credit card debt at an all time high.
In the last three years, there’s been unprecedented events, and often it’s felt like the end of the world. A pandemic that swept the globe, natural disasters striking as climate change happens and now the threat of World War 3. So how could all of this affect our day-to-day spendings.
How could the Russian invasion of Ukraine affect the UK economy?
The Russian invasion of Ukraine only leaves us more unsure of the economic state of the UK and although England has little direct trade links with Russia, it could still make an impact on Energy prices in particular. The UK imported approximately 13% of its total fuel including oil, gas and electricity from Russia, in 2019. And although we rely less heavily on Russia for fuel than other European countries, it could still create an issue for us as Europe as a whole suffers with Energy prices increasing.
Is Covid 19 still impacting the way we spend?
We could be seeing a rise in debt levels as places open again and we’re able to travel. People have been restricted in social activities and holidays for two years and may be more willing to overspend for some leisure time.
It’s been reported that half of us are planning a holiday abroad for 2022. Business Leader surveyed that people are expecting their holidays for this year to set them back £1,567, with 21% of people expecting to spend over £2,000. All in all, it’s estimated Brits will spend £41.2 billion in international travel this year.
Following on from that, more of us are commuting to work again, and with the rise in Petrol – we’re spending more. The RAC reported that petrol prices rose to as much as £2 a litre in some areas of London.
How could climate change make a difference to our economy?
It’s undeniable that we’re starting to see the affects of climate change as severe weather increases, across the world. In the UK, most recently we suffered with three massive storms one after the other, in what will only be the beginning of extreme weather to come.
As the temperatures rise in the UK, the way we grow produce will be affected. CNBC described the affects climate change would have on our British produce as “catastrophic” as we may not be able to grow crops here that we’ve grown for hundreds of years. There was also questions around whether farmers’ would be able to keep as much livestock because of methane emissions.
2022 in a nutshell
All in all, we’re looking at a dramatic year for the British economy and probably across the world. If possible, it would be smart to keep savings for the inevitable “rainy day” and avoid overspending at this time. Or to focus on getting your finances back on track.
What can you do if you’re in Credit Card debt?
Debts of any kind can be overwhelming and as they add up, can become more and more difficult to pay back. The problem is interest rates and charges, as the longer it takes you to pay back what you’ve borrowed, the more the charge and therefore, the more you have to pay back.
There are different debt solutions available that could help you.
If you’re looking to consolidate credit card debt into one monthly payment, you might want to consider a Debt Consolidation Loan. This is a specialised loan that’s particularly useful if you have several creditors and are making multiple repayments per month.
How does it work? You borrow enough to cover all your debts and pay them off, then pay back one monthly fee to the company you borrowed from. Consolidation Loan companies know why you’re getting the loan, so will be understanding if you have bad credit or a poor credit history.
You may also want to consider a Debt Management Plan if you’re in a position where you can afford to pay back a reasonable sum each month, just not the amount they’re currently asking for. It could be a good idea if you’re adamant about not taking out further credit. Though may not be sustainable for large sums of debt.
If you owe a small amount of money or just have one credit card but it’s gaining significant interest due to an expired promotion. You could look into applying for a balance transfer card. This is where you open a new credit card to pay off your current one.
This might sound like you’re not improving your situation. But it will allow you to transfer the debt to a card that will be 0% interest for a certain amount of time, meaning the amount you owe won’t keep increasing.
Which debt solution you choose is up to you but its always worth getting a second opinion. Most of us aren’t experts in finances and debt – so it’s best to speak to someone who is!
The internet will be saturated with solutions and a financial adviser will be able to give you solid debt advice. They often charge a small fee, but it could be worth it if it helps your finances in the long-run. Before signing up to anything, always make sure you read the terms and conditions and consider it for a period of time before agreeing.