Increasing energy costs push households into debt

By Lana Clements 22.10.12

Energy costs are now the biggest worry for squeezed household finances. The latest increases will push more into making uncomfortable choices, according to a report.

The spiralling cost of bills is pushing households further into debt, as people turn to credit cards, overdrafts and loans to meet costs.
In the last couple of weeks, energy giants British Gas, Scottish and Southern and npower announced they are increasing the cost of energy in time for winter, putting cash-strapped households under even further pressure.
Meanwhile food prices are expected to increase, thanks to droughts in America and the wettest British summer in 100 years ruining crops.

Energy costs push homes to the brink

Four in ten are now being forced into debt just to meet the cost of essential bills, according to a report by comparison site Uswitch.com.
But it is energy costs that are top of the worry pile. And the latest price increases are set to ladle further strain on finances.
Nearly one-fifth of those polled said they no longer have disposable income left after bills have been paid. Almost nine in ten now say they will be rationing their energy usage this winter.

Make money go further

Ann Robinson, director of Consumer Policy at uswitch.com, says: "The government has to face up to the fact that we are on the brink of an affordability crisis. When the average household energy bill hits £1,500 a year, 36% of homes - almost four in ten - will be forced to turn their heating off completely. We are only a small step away from this and every price hike takes us that little bit closer to the edge."
Ms Robinson urges consumers to make their money go further, rather than turning to drastic measures such as turning off heating or entering a debt cycle that could be difficult to get out of.
Consider switching to the cheapest energy tariff available in your area - you can use a price comparison site to find the best deal - and choose to pay your bills by direct debit, which is free to set up and use.
If you really have to borrow money to sort out your energy, try to avoid unauthorised overdrafts or loans as you'll end up paying more in interest. If it's an issue of tiding you over until your next pay check, a credit card is a much better bet - clear the balance within the 56-day grace period and you won't pay a penny in interest.