16m have less than £100 in a savings account
MORE than 16million working Britons have less than £100 held in accessible savings accounts.
And more than 17million do not pay off the monthly balance on their credit cards, allowing banks to pocket billions of pounds in interest.
The figures revealed in a damning official report last night paint a worrying picture of consumers spending far beyond their means.
Critics said the findings, in a study by the Financial Conduct Authority (FCA), were an indictment of the UK’s debt-fuelled economy, adding that they showed that it was time for ultra-low interest rates and lax borrowing rules to come to an end.
Labour MP John Mann, a member of the Treasury Select Committee, said: ‘There is a huge crisis with personal debt that the Government has ignored for far too long.
‘We need to make sure that vulnerable customers are not taken advantage of.’
Susan Hannums, of adviser Savingschampion.co.uk, said: ‘It’s little surprise that people are saving less as they clearly don’t have the money to do so or the inclination with rates at such low levels.
‘But the reality is it’s a ticking time bomb if we don’t do more to help and encourage people to put money aside for their future.’
Ultra-low interest rates have left savers struggling to beat inflation, while the big banks tempt shoppers to spend beyond their means with interest-free credit card deals.
Research by the Governmentbacked Money Advice Service found that four in ten working-age people – 16.8million – had less than £100 in savings available to them in instant access accounts at any time. Around 30million use credit cards and 58 per cent – 17.4million – do not pay off their balance each month. In 2014 an FCA study found that 2.1million were in arrears or had defaulted on their credit card payments, and there is no sign the situation has since improved.
Another 2million consumers had spent 90 per cent of their available credit, suggesting they were only just keeping their heads above water. And 1.6million were only making minimum repayments – meaning it could take decades to clear a debt and huge amounts of interest would be going to the banks.
Yesterday FCA boss Andrew Bailey raised fears that demand for credit in today’s world is higher than what is ‘sustainable or sensible’.
The issue has become increasingly prominent since the Bank of England cut interest rates to a historic low of 0.25 per cent after the Brexit vote. It means that savers cannot earn a decent return – or even beat inflation, now at 2.3 per cent. Meanwhile, there are concerns that borrowers are storing up disaster for when interest rates inevitably rise and the cost of servicing their debt shoots up.
Lenders have come under criticism for promoting irresponsible behaviour by offering cards which charge no interest for up to 30 months.
Credit card debt rose at the fastest rate for 11 years in February, with shoppers piling another £562million on plastic – £20million a day. British families now owe a record £67.3billion on their credit cards, around £2,500 per household.
Justin Modray, of consumer group Candid Money said: ‘There are increasing numbers of people who have almost no savings at all and are taking on significant debt.
‘It’s a worrying trend that shows no sign of abating.’