Two million people use credit cards to pay mortgage or rent

More than 2 million people in the UK have used credit cards to pay their mortgage or rent in the last 12 months, according to new research from Shelter, the housing and homelessness charity.

The survey was conducted in August 2010 and asked 2,202 people if they had borrowed money on their credit card to pay their rent or mortgage in the last 12 months – six per cent of respondents said yes compared to four per cent in November 2009.

Campbell Robb, chief executive of Shelter said: "This research brings into sharp focus how keeping a roof over their head has become a daily struggle for millions across the country.”

What the research doesn’t state is the proportion of people who’ve used a credit card to pay their rent versus those using it to pay mortgage repayments.  The Daily Telegraph’s article yesterday quotes separate research by the Council of Mortgage Lenders which suggests that just 2 per cent of borrowers have ever paid their mortgage with a credit card.

A spokesman for the CML said: “We believe that the vast majority of these reported cases relate to tenants paying rent, rather than borrowers paying mortgages.”

Whether this is true or not, Shelter’s research highlights the perils of using one form of debt to pay off another.  While it may seem like a short-term solution, all you’re doing is simply moving debt from one place to another – or “robbing Peter to pay Paul” as the Charity puts it.

The other thing to think about is the interest rates charged on different forms of debt.  Borrowing money on a credit card at a rate of say 16 or 17 per cent to pay off mortgage interest of say 5 per cent will only lead to more debt and higher interest charges in the future, so it pays to try and cut back elsewhere, rather than resort to using credit cards for this purpose.

Shelter offers ten top tips for dealing with your debt and number one is to make your rent or mortgage debts your top priority.  Not doing so could mean you risk losing your home.

However, if your mortgage or rent is under control, then it can make financial sense to use any spare money you have each month to pay off your more expensive debt first, such as personal loans and credit cards.

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