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The economic shocks of the past few years have left consumers sensitive to the risk of falling into debt and cautious about using credit as a financial tool, NerdWallet’s latest study reveals.
The research, conducted by OnePoll on behalf of NerdWallet UK, found that less than half (47%) of UK consumers feel confident and in control of their spending and repayments. For those aged 18-24, the figure drops to just over a third (34%).
Over the past 12 months, more than a quarter (26%) of UK adults spent nothing on credit cards, buy-now-pay-later (BNPL) or other forms of credit (such as loans, overdrafts and store cards). For those who did borrow, the average amount of credit borrowed across the year stood at £3,168.50.
Key Findings
- More than one in three (36%) of those who have avoided using credit cards, finance or BNPL schemes cited worries they might lose control of their spending as the reason why.
- Just over a third (36%) of those aged 18 to 44 feel confident about their spending and repayments, compared with more than half (56%) of those aged 45 and over.
- Almost a quarter (23%) of 18-24-year-olds say they sometimes regret or feel guilty about their purchases, higher than any other age group.
- Almost half (49%) of UK adults surveyed said they have used credit cards, finance or BNPL schemes to cover everyday essentials such as groceries, utility bills, childcare and transport.
- Almost four in 10 Brits with a credit card (39%) admitted to having ‘no idea’ of the current APR charged, and less than one in five (19%) knew their current APR rate exactly.
How Brits Choose and Use Their Credit
Large purchases are a priority
Three in five people (61%) said they had put big purchases on a credit card, finance or had used BNPL, making large expenditures the most common use of credit facilities.
Future borrowing fears
Almost one in five (18%) anticipate relying on their credit cards, finance or BNPL to cope with financial pressures in the future, with those aged 18 to 24 most concerned (44%) compared to those aged 65+ (3%).
Everyday essentials
The high cost of living has made it harder for many households to make ends meet, putting pressure on family budgets. After big purchases, essential household costs like groceries, utility bills, childcare and transport, were the next most popular reason for borrowing, with almost half (49%) of UK adults surveyed saying they’d used credit cards, finance or BNPL schemes to cover these critical outgoings.
The 25-34-year-old age group were the most likely to have used a credit card, finance or BNPL to pay for everyday essentials. Almost three in five (57%) said they had paid for household costs such as groceries, utility bills and childcare using credit compared with an average of 49% across all groups.
Borrowing to cover bills
Northern Ireland (75%), London (70%) and Scotland (64%) are where people are most likely to use finance, BNPL or credit cards to withdraw cash in order to cover bills. Those living in London borrowed more than twice as much as the national average (£537.50 versus £266.50 respectively) to cover bills and payments.
Cost of living in the Capital
Londoners are more likely to rely on credit cards, BNPL and other finance to cover the costs of household essentials. Almost two-thirds (62%) said they use their credit cards to pay for bills, groceries, fuel and childcare, compared with less than half of Brits (49%) overall.
Unexpected borrowing hitting Gen Z and Millennials
One in five UK adults surveyed regularly use BNPL to cover unexpected items, with 25 to 34 year olds being the most likely age group to do so (41%). Alongside this, more than a third (35%) of respondents turn to their credit card to cover unexpected costs, but for the 25 to 34 age group, this rises to more than half (51%).
Lack of APR awareness
Many Brits are unaware of how much their debt is actually costing them. Around four in 10 (39%) of those with a credit card admitted to having ‘no idea’ of the current APR charged, and just under one in five (19%) knew their current APR rate exactly (rising to 34% within London).
Over the limit
Almost one in seven (13%) of UK adults surveyed said they frequently reach or exceed their credit card limit. As well as incurring higher fees, this can hurt your credit score making it harder to borrow again in the future. Almost one in 10 (8%) of UK adults surveyed said they worry their spending habits could negatively affect their financial future.
A More Restrained Approach to Christmas Spending
As we look ahead to a traditionally more expensive time of year, it seems that consumers are intending to borrow more cautiously, aware that overstretching themselves and taking on high-interest debt could leave them with a painful financial hangover.
Almost six in ten (59%) said they would not go into debt in order to pick up bargains this Black Friday. In fact, only 9% say they are considering using a credit card, BNPL or finance to pay for their Black Friday shopping. Over three quarters (77%) said they do not intend to go into debt to cover any Christmas spending.
Amy Knight, NerdWallet UK’s personal finance expert, comments on how those who feel concerned about using credit can build financial confidence:
“Having seen interest rates climb relentlessly since the pandemic only to stick at a 16-year high of 5.25% for months, the risk of falling into debt has left many consumers understandably anxious about using credit as a financial tool.
On one hand, uncovering the nation’s cautious approach to borrowing has been a pleasant surprise, as it suggests people are spending more mindfully and are taking their financial resilience seriously, even as Christmas approaches and we’re tempted to splurge.
On the other hand, our findings suggest that UK consumers are far from maximising the potential advantages that credit can offer them, either through fear or lack of understanding, or both. Used appropriately, credit cards and other forms of borrowing can work for you, not against you, especially where the rewards on offer represent genuine value for money.
However, savvy spenders take the time to shop around for a credit card that meets their individual needs, whether that’s cashback on regular purchases, a generous interest-free period or perks that make it cheaper to pay for treats.”
Methodology
This online survey of UK Adults (nationally representative on the basis of age, gender, and region) was commissioned by Porter Novelli on behalf of NerdWallet and conducted by market research company OnePoll, in accordance with the Market Research Society’s code of conduct. Data was collected between 28th and 31st October 2024. All participants are double-opted in to take part in research and are paid an amount depending on the length and complexity of the survey. This survey was overseen and edited by the OnePoll research team. OnePoll are MRS Company Partners, corporate membership of ESOMAR and Members of the British Polling Council.
Image source: Getty Images
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