From credit cards to rising bills, debt can feel overwhelming – but our money expert says there are simple ways to manage it, reduce what you owe and take back control of your finances.
The war in the Middle East has pushed up prices. Experts say the cost of oil could stay high for months, even if the current peace deal holds. When prices rose in March, the first affected were the cost of filling your car and buying heating oil.
But now the high price is feeding through to just about everything we buy as the cost of goods travelling by road, sea, or air rises. So hopes earlier this year of a fall in inflation have been by predictions that prices will rise right through 2026.
Even before the Middle East conflicts, around one in four pensioners told an Age UK survey that they were struggling financially. That is equivalent to 3 million people aged 66 with serious money worries.
That number is now inevitably higher. There were also concerns last autumn about debt levels among pensioners when the annual Great British Retirement Survey by the investment platform Interactive Investor found that a quarter of retired people had unsecured debt.
That includes borrowing on credit cards that are not paid off in full each month, bank loans, car finance, overdrafts and, worst of all, what we used to call payday loans – short-term borrowing with interest rates in the hundreds of per cent.
Even conventional borrowing can come with eye-watering interest rates. The average charge on money you borrow on a credit card is now at a record 35.8% APR – the highest figures since the financial data firm Moneyfacts began to keep records 20 years ago.
At that rate, a balance of £1,000 kept on a credit card will cost you £358 a year – nearly £7 a week – in interest alone, without the debt reducing by a penny. Credit cards can be a convenient way to spread spending, but they need to be carefully managed and should never be used for long-term borrowing.
My rule is never buy something on a credit card if you are still paying off the money you borrowed last time for the same thing! So do not buy a holiday if you’re still paying off the last trip. And never buy food on your credit card unless you pay it off in full each month.
If you owe money on a credit card for more than 18 months, your bank should start treating it as a persistent debt and step in to help – perhaps freezing or cancelling the card and eventually converting what you owe into a personal loan to be repaid over a fixed period.
The cost of overdrafts is even higher than credit cards as many banks charge the legal maximum of 39.9%. Overdrafts can be useful to cover a short-term lack of funds but should never be used to borrow for longer. Banks should intervene to help if customers use overdrafts repeatedly or for extended periods.
The Age UK survey found that many older people live more meagre lives to avoid debt – staying indoors, missing meals, or living in colder conditions than they would choose. These are understandable compromises, but they bring health risks. So it is essential to deal with the debt and if possible increase income to avoid unhealthy privations.
The pensioners most at risk of debt are tenants who rent their home, homeowners who still have a mortgage into retirement, people who live alone, those with health issues or disabilities, and, of course, anyone on a low income who relies on benefits such as pension credit to boost their income.
Sadly, many pensioners live on incomes below that minimum level because they do not claim money that is available to help them. Step one of a good debt management plan should be to maximise income by ensuring that claims are made for any extra money that is available such as pension credit, disability benefits, council tax reduction, and, for the one in five pensioners who are tenants, housing benefit to help with rent.
If you are behind on your electricity or gas bill, your supplier can help. They are obliged by their licences to engage with customers who are struggling to pay and see if they can help.
Some have charities that will give grants to reduce or even write off debts. There is also help for water bills: all suppliers have social tariffs under various names and with varying conditions that give cheaper rates to those on benefits or with disabilities.
Phone or broadband providers offer reduced rates for some low-income households. If you are struggling to pay for any of these services do not be embarrassed to contact your supplier and explain your status.
You can get free, impartial debt advice from several charities (listed below). They can get some debt interest frozen or even removed, while some debts can be written off completely. If that is not possible, they will devise an affordable repayment plan and help you claim any extra income you’re entitled to. But they can only do those things if you seek help.
If your debt keeps you awake at night – or if it is the first thing you think of when you wake up – then you have a problem that needs tackling. Never ignore debt. If you do, it will only get worse.
The sooner you ask for help the sooner your worst fears and worries may be relieved. Several organisations can bring you relief from debt and help you lead a less stressful and healthier old age. But only if you ask. So do it now.
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