Consumers paying off debt rather than saving

A recent report has shown that a rising number of people are putting any spare cash into paying off their debts rather than saving their money, with many desperate to unburden themselves from high interest debt in the current financial climate.

Many people have high interest debts such as credit cards, loans, and other unsecured finance that is costing them a fortune in interest. With the financial climate as it is many are now shying away from putting their spare money into savings and instead focusing on paying off their expensive debts with their spare cash.

The trend has not come as a great surprise to most industry officials, with interest rates on borrowing still high whilst interest rates on savings are at rock bottom. This has seen many people decide against putting their cash into savings accounts on which they will receive little to no return and instead putting it toward high interest credit cards and loans on which they will otherwise be charged huge amounts of interest.

The trend was highlighted in a recent report from the British Banker’s Association, where an official from the BBA noted that people seemed to be  paying down debt rather than building up savings, even in the main Isa season”.

It is thought that in addition to the poor rate of interest being paid on savings and the high rate of interest being charged on borrowing another reason why this trend seems to be increasing is because of the continued economic and financial uncertainty that many are facing, which means that they want to have the peace of mind of having as little debt and financial commitment as possible. Many also still lack confidence in the banking systems following the turmoil seen over the past couple of years.