Debt worries for a quarter of borrowers

Nearly a quarter of people with a credit card or loan have no idea how much money they owe, research revealed today.

According to Citizens Advice one in five people in debt also admit they have to borrow money just to cover everyday household bills. The group warned that this made people extremely vulnerable if they had a sudden drop in their income because of losing their job or illness, or if interest rates increased.

The research also found that 26% of people found it difficult to keep up with their bills and credit repayments from time to time, while 11% admitted it was a constant struggle or that they had fallen behind on some of them.

The findings come as the Consumer Credit Counselling Service said people were finding it increasingly difficult to get out of debt despite low interest rates, while accountancy firm KPMG recently published research saying a quarter of people resorted to debt to cover day-to-day living costs. Latest figures from the Bank of England also suggest the average household debt has now increased to just under ?6,900.

David Harker, chief executive of Citizens Advice, said: "Citizens Advice Bureaux helped with over 670,000 consumer credit debt problems last year so we know that there is a very fine line between handling credit commitments comfortably and slipping into debt.

"Using credit simply to get by until the next pay cheque or to pay household bills can indicate problems on the horizon. Our research shows that a substantial minority of people are extremely vulnerable to even a slight change in their circumstances, which could saddle them with serious debt problems for many years to come."

The organisation is urging people to be more aware of the problems of taking on too much debt, and to understand the impact of only repaying the minimum on credit and store cards each month.

Around 12% of people with credit or store cards also said they only paid back the minimum repayment or even less each month.

According to Citizens Advice, it would cost ?649 in interest and take eight and a half years to pay back ?2,000 outstanding on a credit card with interest charged at 15% if they only made the minimum monthly payment of 5%, or ?5 if that was higher.

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