A quarter of consumers will be holding credit card debt throughout 2012, according to a new survey.

The GoCompare.com research found 26 per cent of Britons will be reliant on plastic for the whole of this year and nine per cent have admitted they have to use cards to make ends meet.

It found a wide range of financial concerns are leading to hard-pressed consumers maintaining their debt, with the rising cost of living and bills being listed as the most worrying by 22 per cent.

A quarter of people want to find ways to reduce their outgoings and 35 per cent wish to either get out of debt altogether, or at least reduce what they owe on loans and credit cards.

Head of credit cards at the price comparison site Jeremy Cryer remarked: "If used carefully, plastic cards can be a useful budgeting tool, but when used to plug a gap in everyday spending, card debt can quickly spiral out of control."

Commenting on the "worrying" news that nearly a tenth of people rely on their cards to get by, he added: "No wonder we owe a staggering £60 billion on credit cards as a nation".

Those who are in debt that has become too deep to pay may wish to consider a debt management plan to spread out repayments more.

One way in which people are worse off because of rising bills is in the area of energy prices.

A study by uSwitch calculated last week that Britons are still collectively £1.9 billion a year worse off after the large energy price hikes last year, which were far larger than the reductions made by major suppliers earlier this month.

Posted by Paul Thacker
 

Consumers are collectively £1.9 billion worse off than they were a year ago as a result of energy price movements, it has been calculated.

The figure was worked out by uSwitch after Scottish Power became the last of the big six suppliers to unveil a reduction this week, announcing it would trim gas prices by five per cent from February 27th.

While this may mean lower costs for consumers of £34 a year or 2.6 per cent on average, it comes after two previous large hikes that put up bills by £224 (21 per cent) in the previous 12 months.

Moreover, the average annual price bill once all the newly-announced cuts are in place will be £1,259 – 91 per cent more than the £660 a year typically charged in 2006.

Such costs could still leave many in debt as they struggle to maintain bills, as uSwitch calculated that the lower prices will only lift 136,500 out of fuel poverty.

Commenting on the situation, director of consumer policy at the site Ann Robinson said the reductions "will seem like a drop in the ocean to cash-strapped consumers, especially when compared with the £224 or 21 per cent price hike seen since the end of 2010."

She added: "The cost of energy has become a major household worry and these single digit price cuts will do little to change that." 

However, the moves by energy firms to cut prices have been praised, with site editor at MoneySupermarket.com Clare Francis calling the round of reductions started by EDF Energy as a "welcome boost" for consumers.

Posted by Paul Thacker

Consumers who are already struggling with debt may find their situation deteriorates further as the country is already back in recession, according to one economic analysis.

The Ernst and Young ITEM Club has claimed: “The UK is probably in technical recession at the moment and likely to remain stalled until the second half of the year when falling inflation should provide a platform for a consumer recovery.”

Such an argument suggests that the final quarter of 2011 saw Britain’s economy contract and that this will be the start of an official recession as the first quarter of 2012 will also see negative growth.

As yet, however, even one quarter of decline has yet to be confirmed, making the conclusion tentative.

However, if it is the case that the UK has returned to recession like many of its eurozone neighbours, the situation may make matters worse for many as rising unemployment could make it particularly hard for some to pay back what they owe.

Andrew Smith, ClearDebt’s Director of Marketing and External Affairs comments:

“A lower inflation rate doesn’t look like it will be good news for people trying to repay debt. Creditors do aim to ensure people in debt repayment plans have enough income to meet essential needs, but debtors will always find it hard when the amount needed to meet those needs is rising sharply and the amount creditor guidelines allow doesn’t change as fast. Costs of heating the home and getting to work can’t be avoided and have seen sharp rises. Creditors need to respond to this if the people who are working hard to repay their debts are going to be able to afford to stay on plan”.

The one consolation in the ITEM Club prediction is that of a recovery in the second part of 2012, which would mean the second recession would be much shorter than that of 2008-09.

And the forecast of lower inflation does appear to be accurate, with the Office for National Statistics revealing today that the Consumer Prices Index (CPI) rate dropped in December to 4.2 per cent, compared with 4.8 per cent in November.

It means the rate of CPI has fallen by one per cent since its peak in September last year and this comes before the impact of last January’s VAT hike drops out of the equation, which will have a downward impact on this month’s figures.

By James Francis

Unwanted Christmas gifts might provide an unusual source of help for those who are deep in debt.

While the festive season is a time when some pile up credit card debt and other borrowing in order to pay for gifts and other costs, the festive season may provide part of the solution.

This possibility has emerged from a survey by online auction site lovelyjubbly.com, which has found Britons tend not to sell or give away unwanted gifts, but hoard them – so many, in fact, that put together they could fill Wembley Stadium 11 times over.

Commissioner of the lovelyjubbly survey and auction expert Gareth Whipps noted £124 billion is spent on gifts each year, but one in three Britons received unwanted items.

He added: "The other question after the survey was run was how much was that and that worked out to be £900 million worth of unwanted gifts, sitting there, not doing anything, and possibly be hidden in the back of a cupboard."

Such gifts might be discreetly sold on via an online auction site like lovelyjubbly or eBay- which could raise cash to pay off credit card bills and other debts.

But for many consumers, the gifts they have received this year are ones they will want to keep, rather than sell.

Using a debt management plan may be an alternative to letting wanted treasured gifts go and those doing this may find the spreading out of payments makes everything much more manageable.

People who are in debt should check out what benefits they may be able to claim, as this may help them financially, managing director of Debt Advice Foundation David Rodger recently advised.

Posted by Paul Thacker