Published: 07/08/2019 By Ryan RussellData available from The Insolvency Service has highlighted a worrying increase in the number of young people entering formal insolvency procedures. According to the data, under 25s now make up 6.5% of all personal insolvencies. With social media and television shows (hello Love Island) promoting the latest “must-have” fashion, cars and general celebrity lifestyle, the temptation is to spend above your means in order to keep up appearances. With easy access to store and credit cards (which can carry extremely high interest rates), it’s no wonder that young adults are getting caught in this trap.
When making purchases on credit, you should ask yourself some simple, but important, questions before diving in:
- Do I actually need this?
- Can I save up to buy it rather than using credit?
- Can I afford to pay this off quickly and avoid interest charges?
These seem like simple things to consider but it’s not always that easy. For example, it’s becoming more and more common to bulk buy online and send back what you don’t want. Many online retailers, like ASOS, provide free delivery (over a certain order value of course) and an easy returns process. As a result, the temptation is to order a variety of items, “stick it on the credit card” and then worry about it later. The thing is, you naturally won’t return everything you order and, if you don’t have a plan, your credit card balance will slowly and steadily increase. If you don’t get a handle on this and budget for payments to reduce this, it can spiral out of control pretty quickly.
If used properly, credit cards can be a very good tool to assist with essential larger purchases/payments as they allow you to spread payments over time, and in some cases offer low or zero interest periods. They can also be used when the unexpected happens, like car repairs, and boost your credit rating. The key is to make sure that you retain control and have a plan to pay off your purchases.
If you feel like your personal debt may be an issue, it’s important that you seek advice as there will be a solution available which suits your circumstances. At TBA we provide specialist advice on debt matters and also offer a free initial consultation (with no obligation), so please get in touch.