With the recent announcement that many household bills are going up by an average of 3.5% (from 1st April 2014), research by credit comparison expert Totally Money has revealed that 21% of UK consumers are already struggling with payments and are paying for household bills on credit card.
What this means,according to the regulator Ofwat, is that the average household in the UK will pay 388 for their water and sewerage this year, an increase of 13. In an article by the BBC, it was suggested that prices are increasing at more than double the rate of wages. In other words, we are continuing to get poorer.Overall consumer prices rose by 2.7% in February. By contrast,average earnings are rising by just 1.2%.
This price rise is even more concerning following the findings from Totally Money about payment methods being used to pay bills. With 3.4 million people paying for electric and gas on credit card, 2 million paying for council tax and 1.3 million water bills on credit, the additional charges imposed by credit card providers could add a small fortune on top of the original cost of the bills.
For example, by paying on credit cards, some users may not be aware that they could be adding an extra 29 to the cost of their average annual council tax bill, 24 to the average annual energy bill and 8 to the average annual water bill.
Will Becker, CEO of TotallyMoney.com, the credit comparison website commented: Consumers really do need to brace themselves for a further raft of price hikes in the coming weeks. With so many people admitting that they pay household bills on credit cards, this is a clear sign of financial distress. In effect, paying bills in this way is a ‘self-inflicted’ price hike as the addition of surcharges and potential interest charges are just adding to household costs. This is an even bigger issue for those who cannot pay their credit card bill in full at the end of the month.
Just to put this in perspective, for those who cant afford to make ends meet, paying bills on a credit card is a far better option than missing payments or turning to more expensive sources such as payday loans or unauthorised overdrafts. However, it is not a long term solution and for many it may be as simple as spring cleaning your finances and saving enough money each month to keep you out of the red. For those that really have to pay their household bills on credit cards the best option would be a long term 0% purchase card to avoid interest payments. Alternatively, a market leading cashbackcard could erode handling charges but only if paid in full each month.
The latest hike in household bills should be enough to get you thinking about how much you pay. Make sure you’re comparing the best deals on the market, including for new customers as existing customers don’t always get offered the same deal. At the same time, if you are having to pay for household bills on credit card, make sure you pay off as much of the balance as possible each month and consider a cashback card to offset the payment fee if you’re able to pay off in full.