A report by AXA Avenue claims that Britons are increasingly torn between two tendencies: their “Dr Jekyll” side, which encourages them to save, and their “Mr Hyde” half, which tells them to finance their lifestyle on credit cards and credit card debt.
However, money experts are warning borrowers that savings should be directed towards paying off debts as a priority, due to the interest incurred on costly loans overshadowing the benefits of saving.
On average, it was found that every £1 earned on savings was matched by an additional £5 spent servicing long-term debts.
Jekyll and Hyde type individuals had an average debt of £7,622, while saving £221.14 a month. While savings earned them £12.12 in interest every month, this was overshadowed by the extra £73.74 accrued on their debts.
According to AXA, one in four Britons are caught in the Jekyll and Hyde trap, saving a collective £2 billion a month, despite unsecured debts of £57 billion.
ClearDebt marketing director, Andrew Smith, agreed with the advice to pay off debt before saving and urged people to use the ‘snowballing’ technique.
He explained: “If you are still only a little way down the debt track and can still pay your bills when they fall due, then stop using your credit cards and put all the money you can afford into repaying your most expensive card or loan first. Then move onto the next most expensive, and so on. This can slash months off the time needed to repay your debt.
“Of course, you must keep making the minimum payments on all your credit cards and loans, and you must keep an eye on changing interest rates too.”