The UK's first financial advice social experiment conducted by Axa, has found that millions of people are now facing problems caused by pressures to fund their buy-now-pay-later habits on cheap credit, at the same time as feeling that they have to save some of their income in case of emergencies. More than one in four adults are putting around £2 billion into savings accounts every month, while ignoring the £57 billion they owe in unsecured debt. Axa have said that by re-directing savings for just two and a half years, most people in the 25 - 34 year old age group could clear their debts completely, by careful budgeting and consolidation of existing debts. Using these methods in the experiment, Axa were able to reduce this age groups' debt by £12,000 in only 12 weeks, and after 6 months the figure increased to more than £31,000.
Our view:
This is a false economy. Interest rates on cards are more expensive that the interest you receive on savings. If this is the case, switch you cards to one of those interest free balance transfer cards for 12 months or so and really start to pay off those debts. Do not even think about saving elsewhere - it is a false economy. If you need emergency money you will still have to card to make a purchase.