People using credit to ‘patch holes in their budgets’
May 18, 2008 by admin
Filed under News, News-Credit-Cards
With financial conditions worsening under the current credit crunch, people are increasingly turning to credit to make up any shortfalls in their budgets, Fool.co.uk has said.
David Kuo, head of personal finance at Fool.co.uk, also said that credit fraud is likely to increase as people struggle to cover their living expenses.
People are increasingly seeing their personal finances being stretched as they face bigger outgoings due to rising household expenses. At the same time, salaries have not risen fast enough to cover the increased costs, Mr Kuo said.
Capital Economics recently reported that average earnings growth is set to remain at just under four per cent a year while food inflation is expected to stay at six per cent over the coming months.
“Initially it just starts with [people] saving a little less money…the next step is [people] start raiding [their] savings in order to try and cover [their] outgoings. The third step is [people] have to use credit in order to try and patch up any holes in [their] budget,” commented Mr Kuo.
