Poor budgeting leaves people struggling to pay credit card debt

October 10th 2018
  • Majority of people struggle to settle their outstanding credit card debts
  • Poor budgeting is the main reason people struggle to make their repayments
  • Findings are part of Arrow Global’s ‘Debt Britain 2018’ research

People over the age of 45 who have failed to make debt repayments are three times more likely than under 25s to have a credit card balance not settled in full every month, according to the latest Arrow Global consumer research.

Delving further into the findings on those who have failed to make debt repayments, 69% of those aged 45-54 year olds and 68% of those over 55 years of age have a credit card balance not settled in full every month. This compares with just 22% of 18-24 year olds and 42% of 25-34 year olds who also have failed to make debt repayments. This challenges the view that older generations are more adept at managing their money and that younger generations bury their heads in the sand when it comes to personal finances.

Looking at the source of these debts, credit cards are the number one problem, with 51% of those surveyed unable to make their scheduled repayments, more than twice as many as the next most common sources of problem debts; overdrafts (24%) and unsecured personal loans (18%).

These findings are consistent with figures from Arrow two years ago whereby credit card, overdrafts and unsecured personal loans topped the list of debts that people were unable to clear each month.

Top three sources of loans people struggle to repay 2018 vs. 2016

What type of loan(s) were you unable to meet repayments on? 2018 2016
Credit card balance not settled in full every month 51% 55%
Overdraft 24% 23%
Unsecured personal loan 18% 19%

When asked about their inability to clear their debts, 32% of those asked blamed poor budgeting followed by reduced earnings (28%) and simply borrowing too much at the outset (22%).

Surprisingly, higher earners who have failed to make debt repayments were even more likely to blame poor budgeting as the main reason for struggling with their debt repayments. Half of those earning £55,001-75,000 and 56% of those earning more than £75,000 put the blame squarely at the foot of poor budgetary management.

These findings show that financial education, including how to manage the weekly household budget, is relevant for all people and not just those on lower incomes.

Lee Rochford, Group Chief Executive Officer of Arrow Global comments:
“It’s clear from this research that many consumers persistently struggle with their debt obligations. Whilst some factors are clearly outside their control, such as redundancy and illness, this research shows that better budgetary management would stop some people, including those on higher incomes, from falling into unsustainable debt.

“If people do fall behind on their repayments, it’s important that they don’t bury their heads in the sand and that they proactively seek professional advice to get their finances on a more stable footing.

“We hope the results will ensure the consumer debt industry becomes better at recognising those who need help and how they can be supported. As a responsible credit management services provider, we focus on helping people manage and repay their debt in a sustainable way.”

*Survey of 2,054 UK Adults (18+) with debt including 546 default payers (including late payers) carried out in February 2018. Research conducted by Opinion Matters.

ENDS

For further information:

Arrow Global
+44 (0)161 242 5896
Paul Fitzjohn

Instinctif Partners
+44 (0)20 7457 2804
Rachel Cashmore

About Arrow Global

Established in 2005, Arrow Global specialises in the purchase, collection and servicing of non-performing and non-core assets. We identify, acquire and manage secured and unsecured loan and real estate portfolios from financial institutions, such as banks and credit card companies, as well as retail chains, student loans, motor credit, telecommunication firms and utility companies.

We play an active role in helping financial institutions reduce their balance sheets and recapitalise in order to increase mainstream lending. By purchasing and managing non-performing loans and other non-core assets, we provide valuable capital and expertise to a growing European market.

We are a regulated business in all of our European markets, managing over £49.3 billion AUM across six geographies with over 1,700 employees and approximately 10 million customer accounts.

In 2017, we helped over 750,000 customers to start clearing their debts in a manageable and timely manner.