UK consumers are only finding lint when looking for spare cash in pockets, so instead they've been dipping into overdrafts and credit cards to survive until payday.
According to This Is Money, a MoneySupermarket study reported that two-in-five UK consumers have used either their authorized overdraft or extended overdraft to make ends meet. Moreover, a little over a quarter of consumers have also resorted to making charges on their credit cards to cover them.
The research also indicated that four-in-10 Brits are caving in and breaking into their personal piggy banks for spare change, although this is still the smarter alternative.
MoneySupermarket reported that people using their £500 overdraft accounts were in jeopardy of high payback prices. Extra fees could amount to at least £360 each year, and those using credit cards could be paying up to £77 if only making minimum monthly payments.
“The rising cost of living over the past few years has hit many people hard and it is easy from time to time to find yourself running short of cash and having to turn to existing savings or other forms of credit to tide you over,” Kevin Mountford, MoneySupermarket’s head of banking, said.
Due to tough financial times, there has been a noticeable increase in the roll out of zero interest accounts and cashback credit card programs. Santander reported that the majority of cashback cardholders often use them to make payments at petrol stations, grocery stories and department stores.
Cash-strapped UK shoppers are taking all the pennies they can get. They frequently use cashback credit cards to pay for products that allow a 3 percent cashback reward. These cards are a reasonable way to budget finances, and are also a good opportunity for consumers to build a good credit score. Cashback programs are also comparably less costly than applying for short-term payday loans to get cash.
Many merchants and lenders have been tapping into the cashback market, and the consumer response has been extremely positive. Santander reported that since its cashback rewards scheme started in the fall of 2011, they have been able to give £27.6 million back to consumers.
Sainsbury recently launched a cashback credit card to enhance customer rewards. The loyalty program provides vouchers for shopping in-store, and gives shoppers 5 percent cashback in the first three months of registration.
Mountford added, "For those relying on credit cards or their overdraft as a fall back until pay day, as our findings show, it really does pay to research your options and think about the additional interest you could end up forking out, beforehand."
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