Press Release

VIRTUAL SPENDING LEAVES 'CAVALIER CARDHOLDERS' IN THE DARK AND IN THE RED

7 March 2006

Women and 16-24s most likely to overspend on plastic

As many as two in five (39%) Brits overspend on their debit cards on day-to-day purchases and the most common reason is because psychologically, they feel they are not spending any money, according to National Savings and Investments' (NS&I) latest Quarterly Savings Survey.

The convenience of the cashless lifestyle has created a group of 'cavalier cardholders', who use cards for everyday purchases, but are less in control of their spending as a result. More than a third of the overspenders (37%) go over budget on their debit cards because handing over their cards does not register as spending. These cardholders are risking debt by dismissing the impact of their plastic shopping sprees.

Losing touch
'Cavalier cardholders' are not just going into the red, they are also more likely to be in dark about their finances. One in six (16%) Brits, who admit they are not on top of their finances, claimed using cards regularly was to blame for their lack of awareness because it makes it more difficult to keep track of their finances.

With plastic payments growing in popularity, there is a risk that personal debt will increase as the use of cards becomes more prevalent and 'cavalier cardholders' continue overspending. The research shows almost half of British consumers (45%) use cash for day-to-day spending but an equal number make their daily purchases using debit cards (33%) and credit cards (12%).

Women more likely to overspend
Women (41%) are more likely to overspend on debit cards than men (35%), suggesting they have less control over their spending. 

Women are also more likely to delude themselves about their spending habits, with 41% of those who overspend on their debit cards claiming they do so because they do not feel they are actually spending money (men: 32%).

Youngest are the worst card abusers
Young adults aged 25-34 are the highest users of debit cards (45%) across the age groups, showing how effortlessly they have adopted the cashless lifestyle. But, they are not as savvy in managing their card expenditure, with 41% overspending on their debit cards.

Only the younger 16-24s are worse in terms of overspending. More than half (59%) of 16-24s admit they go over budget when using a debit card. Fortunately, they still favour cash, with only 36% choosing to pay with a debit card for day-to-day purchases.

Lack of financial awareness
Extravagant virtual spending corresponds with a lack of financial awareness among some Brits. A quarter of people (25%) have no idea how much they spend in a week, and a similar number (26%) have no idea of their monthly cash flow.

This lack of knowledge extends into other financial aspects of life. Only half (51%) the population know the balance on their credit cards and nearly half (46%) have no idea what interest rates they receive on their savings or are paying on their accounts and debts.

An effect of modern life
The pressures of modern life appear to have an impact on financial awareness. Nearly a quarter (23%) of those who admitted to being unaware of some aspect of their finances claimed they are too busy to keep on top of it while 16% attributed their ignorance to using cards, which makes it difficult to keep track of finances.

A further one in 10 (10%) admitted they do not bother to read financial correspondence, suggesting some Brits have a real disinterest or even a fear of their financial matters. 

Retaining control
Dax Harkins, senior savings strategist at NS&I comments: "The shift from physical payment in the form of cash to virtual spending on cards has caused many people to lose track of their day-to-day spending. While these forms of payment bring convenience, our findings shows that plastic payments lower some consumers' financial awareness and control, causing them to spend more money, more easily.

"Plastic payments are a useful part of managing our money in a fast-paced society and they are here to stay, however as we use them more and more we need to safeguard against losing touch with the reality of our spending and debts. Brits need to set some time aside each month to look over their finances in order to stay financially fit and to avoid the costs involved with overspending."