Young ‘relying more on credit’

A new generation of credit users are finding themselves in increasing debt as their budgets are being squeezed.

This is according to a new study by MoneySupermarket, which found 19 per cent of those aged between 18 and 34 have used more credit this year than they did in 2011, compared with 13 per cent using less.

In addition to this, the survey revealed 11 per cent have made cash withdrawals using a credit card, adding to their debt with fees, while seven per cent took out a payday loan.

These figures compare with eight per cent and four per cent respectively for the population as a whole, suggesting older people are less likely to build up credit card debt or take on risky high-interest loans.

Unauthorised overdraft usage was also higher for young people (15 per cent) than for the population as a whole (seven per cent).

However, not all the financial data has brought bad news, with 21 per cent of 18 to 34-year-olds saving for the first time this year.

Head of banking at the website Kevin Mountford said: "There is no doubt the last year has continued to drain on many people's finances, and those in their younger financial life cycle seem to be struggling the most."

Mr Mountford emphasised that there are times when using credit sensibly can be advantageous, but warned users need to be "clued up".

People may find they get into trouble with credit if they borrow too much or if they fail to maintain payments, which can lead to penalties being incurred and raise the cost of future credit due to their credit records being damaged.

A study carried out for the National Children's Bureau and Personal Finance Education Group found nearly half of schoolchildren worry about money, with 96 per cent believing financial education is necessary for all.

By Joe White