One Million Brits Use Payday Loans to Cover Bills Every Month

Sep 14, 2012, 07:41 ET from

LONDON, September 14, 2012 /PRNewswire/ --

  • 28 per cent of Brits use credit cards, overdrafts, payday loans and other loans to cover the cost of household bills each month
  • Brits borrow £2 billion every year from payday lenders to cover essential household bills

Nearly 14 million (28 per cent) people in the UK are borrowing money to cover the cost of household bills in a typical month, according to new research[1]from the Santander 123 account.

Instead of using money from their current account, Brits are borrowing £3.6 billion each month* to meet the cost of gas, electricity, council tax, water and other household bills, which is equivalent to around £259 for each person borrowing money.

While millions are turning to lower cost borrowing such as an arranged overdraft, the research raises concerns as more than a million people (2 per cent) collectively borrow £2 billion** every year, or £153 each per month, from payday lenders to cover these basic monthly bills.

The most popular source for finding additional money is an overdraft, with around 17 per cent of UK adults using this service each month to pay their bills, borrowing an average of £264 each, more than any other source.

                                                    Average amount
                             Percentage of people   withdrawn/borrowed
                             who withdraw/borrow    per person, per
    Alternative payment      from this source in an month (among those
    source                   'average month'        using each source)
    Overdraft                         17%                 GBP264
    Credit card                       15%                 GBP172
    Loan from a payday
    lender                             2%                 GBP153
    Loan - other                       1%                 GBP153
    All alternative payment
    sources                           28%                 GBP259

Santander's research reveals that despite 28 per cent of all Britons looking to these alternative payment sources to help cover the cost of bills, only 32 per cent regularly check for cheaper deals on services like utilities or TV subscriptions meaning that millions may well be paying over the odds.

The findings also show that only a quarter (26 per cent) of bill-payers actually ensure they have sufficient funds in their account by making sure they pay bills or schedule direct debits for just after payday.

Reza Attar-Zadeh, banking director at Santander, said: "In an ideal world, household bills should be one of the first costs to be covered when payday arrives, but as the research highlights, this isn't always possible. The cost of living is going up, driven in part by the rising cost of household bills, and as a result, millions of people are regularly borrowing money to make ends meet which cannot be sustained in the long-run.

"The fact that only a third of people are regularly looking for ways to reduce their monthly bills is worrying, as there are a number of opportunities to bring these costs down that require very little effort or change. Discounts for paying by direct debit are widely available and using comparison sites can often knock considerable amounts off monthly bills. Santander's 123 Current Account also offers up to 3 per cent cashback on household bills, which could make a big difference."

Men are more likely to use alternative payment sources to cover bills than women, with 30 per cent of males doing so each month compared to 26 per cent of females. Younger bill payers are also more likely to borrow money to cover bills, with 38 per cent of people aged 18-34 doing so, compared to just 30 per cent of those aged 35 - 54 and 17 per cent of over 55s.

More people in London are turning to loans to cover household bills than anywhere else in the UK, with 33 per cent doing this in an average month. In contrast, the lowest is the North East, South West and West Midlands where just 22 per cent are doing so.

Product benefits

New 123 Current Account pays cashback on household direct debits

  • 1% cashback on water and council tax
  • 2% cashback on electricity and gas
  • 3% on mobile, home phone, broadband, and paid-for TV packages

New 123 Current Account also pays in-credit interest

  • 1% AER on the entire balance, once the customer's balance is £1,000 or over
  • 2% AER on the entire balance, once the customer's balance is £2,000 or over
  • 3% AER on the entire balance, once the customer's balance is £3,000 or over (up to £20,000)

The information contained in our press releases is intended solely for journalists and should not be used by consumers to make financial decisions.

Notes to Editors

  1. Research commissioned by Santander and conducted by Opinium Research 8th - 11th June 2012. Sample size 2,011 UK adults.

*     Respondents were asked to estimate how much they take from a number of sources each month to pay for bills. The average across all sources for all who use a form of debt is £259.07.
557 respondents out of 2,011 said they use one of a number of sources to cover monthly bills which equates to 28% of the sample. 28% of the UK adult population (49,969,000) is 13,840,245. £259.07 x 13,840,245 is £3,585,592,272

**    45 respondents out of 2,011 said they use a payday loan to cover monthly bills which equates to 2.2% of the sample. 2.2% of 49,969,000 is 1,118,153

      These respondents estimated that they take an average of £152.78 from payday loans or £1,833 per year. £1,833 x 1,118,153 gives us an annual total of £2,049,946,544

The 123 Current Account in detail


  • Cashback available on individual direct debits to council tax, water, gas, electricity and communications providers - minimum of two direct debits required, although more direct debits means more cashback
  • In-credit interest paid on total balances once a customer has a balance of more than £1,000 in their account, up to £20,000.  Once a customer has the required minimum £1,000 in their account, interest is paid on the total balance from £1.  Interest is not paid on balances over £20,000.


  • Open to new and existing customers aged 18 and above (must be UK resident)
  • Minimum monthly funding required: £500
  • Single and joint account options
  • Customers do not need to have another product with Santander to qualify
  • Monthly fee of £2 per account (equates to 6p per day).

Operational features

  • Visa debit cards provided
  • Can be opened and operated online, by phone and in-branch
  • Clear and transparent daily charging structure for overdrafts
  • No switching incentive presently available.


Santander has reduced the maximum level of fees a customer could be charged per month from £150 on other accounts to £95 for the 123 Current Account, as follows:

  • Arranged overdrafts: £1 per day capped at 20 days in each monthly statement period
  • Unarranged overdrafts: £5 per day.  No cap, but all fees on this account are capped at a total of £95 per monthly statement period
  • Paid item fee: £5
  • Unpaid item fee: £10
  • Total monthly fees a customer could pay: all fees on this account will be capped at £95 per monthly statement period.

Customers need to pay in a minimum of £500 a month (also £500 for joint accounts, e.g. £250 per person) and there is a £2 a month fee on the account.  Customers also must have a minimum of two direct debits from their account although the more eligible direct debits set up, the greater the cashback paid.

Cashback and any in-credit interest earned are paid monthly on the first statement date after the account is opened, provided the eligibility criteria are met, and the £2 account fee is deducted at the end of each monthly statement period.

Customers need to have a minimum balance of £1,000 to qualify for in-credit interest - this means interest is not earned on balances below £1,000, and interest is paid on balances up to £20,000.  No interest is paid over this amount.

About Us

Santander UK plc is a full-service retail and commercial bank providing services to 25 million customers, with more than 1,300 branches and 28 regional business centres. It is a wholly owned subsidiary of Banco Santander. Santander UK plc manages its affairs autonomously, with its own local management team, responsible solely for its performance. Over 90% of the assets on Santander UK plc's balance sheet are UK based and it is subject to full supervision of the Financial Services Authority (FSA) in the UK. Santander UK plc customers are protected by the Financial Services Compensation Scheme (FSCS) in the UK.

Sovereign exposures to Europe (excluding UK) as at March 2012 are not significant at less than 1% of total assets and primarily relate to Swiss government. Total exposure to periphery countries is c. 0.3% of total assets.

Banco Santander (SAN.MC, STD.N, BNC.LN) is a retail and commercial bank, based in Spain, with a presence in 10 main markets. Santander is the largest bank in the euro zone and is among the fifteen in the world by market capitalization. Founded in 1857, Santander had EUR 1.383 trillion in managed funds, more than 102 million customers, 14,760 branches - more than any other international bank - and 193,000 employees at the close of 2011. It is the largest financial group in Spain and Latin America. Furthermore, it has significant positions in the United Kingdom, Portugal, Germany, Poland and the U.S. northeast. Santander Consumer Finance operates in the Group's core markets as well as in the Nordic region. In 2011, Grupo Santander registered EUR 7,021 million in recurring net profit.

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