According to a report on financial inclusion by a Treasury select committee, the “cashless society” trend is inaccessible to many, making poor Britons turn to more expensive methods and the debt risk this brings.
“Such people face higher charges for loans and other financial services,” the report states.
However, it goes on to note that an ignorance of the debt advice available was also causing financial problems for some: “They face barriers in undertaking even simple transactions. They often do not know who to turn to for advice and support.”
The report comes as first direct announces that it is to be the first British bank to start charging customers for holding a current account unless they earn around £25,000, the type of financial exclusion that the report hits out at.
David Mond, CEO of debt help firm ClearDebt said that such charges are a “slippery slope” that other banks could soon slide down, which, coupled with high banking fees, “can make ends impossible to meet for those who are already struggling”.
“If banks start to refuse to provide free accounts for people paying in less than £1,500 a month, more people will end up in the arms of unethical lenders. This is likely to make debt an even bigger issue for some,” he added.
Mr Mond’s warnings are backed up by the committee, who found that debt as large as £100 million could be incurred due to such financial exclusion, with the report calling on government action to tackle financial exclusion.