With the 1st April bill hikes from energy, council tax and water suppliers looming, new research from TotallyMoney.com shows that 21% of consumers are already using credit cards to pay monthly household bills. With the majority of providers already levying a surcharge of around 2% for credit cards payments, an overreliance on plastic could mean that struggling households risk falling even deeper into debt – especially if they fail to pay off their bills in full each month.
Based on the average household energy bill of £1,177, this 2% surcharge will increase the cost by an additional £24 a year without taking into account potential interest charges which are on average 18% APR.
Research from the credit comparison website also shows that of those paying for bills with credit cards, the highest number of people are using credit to pay gas and electricity bills (11%), totalling 3.4 million consumers. More than half (52%) of these people concede they have turned to credit as a direct result of the recent price increases. Several fixed energy tariffs are due to come to an end in April, including those from the biggest suppliers. These consumers will be shunted onto a standard tariff if they don’t take action, costing anything up to £225 a year more.
With the average council tax bill also set to increase by 0.6% on 1st April costing the average consumer an additional £8.47, research shows that almost two million consumers opt to pay this bill with their credit card. In some regions, such as Wales, increases will be as high as 4.2%, which could cost residents an extra £42 annually. With some councils implementing a surcharge of up to 2.5%for credit card payments, this could increase the average annual bill (from £1,464) by an additional £36.60 if consumers pay the bill off in full when it arrives. This is more than four times the annual price increase.
To make matters worse, water companies are also hiking bills by an average of 2% across the industry, costing consumers around £8 more each a year. A further 4% of credit card holders pay for this bill on plastic, so while the price hike may be relatively small, when combined with other increases it only adds to mounting household debt.
Alarmingly, it’s not just utility bills that consumers are struggling to find the cash for: 5% of those renting end up paying with credit cards and 4% of homeowners are using their card to pay off their mortgage.