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Wednesday, 18 February 2009 -

Young expect to pay bills with credit - survey

Young people and those in low income households are resigning themselves to increasing their debt levels to cover expenses, a survey released today finds.

Those aged 18 to 34 years-old had the highest expectations of needing to turn to credit to cover otherwise unaffordable expenses in the coming months, credit reporting agency Dun and Bradstreet's survey showed.

One in three respondents intended to use credit to pay their bills. This dropped to 21 percent of those aged between 35 and 49 and down again to 17 percent for those aged over 50.

Twenty-six percent of households earning less than $30,000 also showed significant concerns about a need to turn to credit, the survey found.

This dropped to 20 percent for high income families.

The impacts of the global credit crisis and the difficult local economy were creating a divide between different demographics, Dun and Bradstreet general manager John Scott said.

"The differences between the haves and have nots are evident in the credit and debt expectations of New Zealand families."

The survey showed high income households were seeking to rein in their debt, however low income households and younger people were "doing it tough" and as a consequence were anticipating higher debt levels in the months ahead, Mr Scott said.

Nearly a third of respondents aged between 18 and 34 were expecting to apply for credit by the end of April, and slightly more were anticipating to increase their credit level.

"With younger Kiwis indicating a need to turn to credit to cover bills the significant intentions of this group to apply for new credit in the months ahead is a cause for concern," Mr Scott said.

Christmas spending was also a worry for younger New Zealanders, with 29 percent concerned about how they are going to pay the presents off in the coming months – five points higher than the national average.

"Younger people need to be careful with their use of credit to avoid their debts spiralling out of control.

"Paying bills with credit can be an early indicator of debt stress and in an environment where banks are only willing to lend to those without adverse data on their credit file, consumers need to be particularly stringent with their financial affairs."

There were 2750 respondents to the survey.