Almost a fifth of people are using costly forms of credit each month to help pay household bills, according to new research.
Some 7.5million people use credit cards with a further million turning to controversial payday lenders, according to estimates by bank Santander.
The figures signal a trend of households to turning to expensive forms of credit that add to their financial squeeze when the times comes to repay the money.
Debt: Millions of people are turning to high forms of credit to help pay monthly household billsTypical credit cards interest rates are about 19 per cent (APR), but more worrying are payday loans which often charge eye-watering rates of about 4,000 per cent.The short term loans are designed to bridge the financial gap before payday but if people are unable to repay they face extortionate levels of interest.The amount being borrowed each month adds up to £3.6million, or an average £259 for each borrower, according to the research.
There are also 4.2million people that turn to lower cost borrowing, Santander claimed, with around 17 per cent of those who borrow to make bill payments dipping in to an arranged overdraft.HOW PEOPLE BORROW TO COVER BILLS
Overdraft17 per cent£264Credit card15 per cent£172Loan from a payday lender2 per cent£153Loan - other1 per cent£153All other sources28 per cent£259Source: SantanderNote: Other sources include money from parents, family or friends, other types of loans and savings.
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.'HOW TO CUT YOUR BILLS
Switch energy suppliers - You could save up to £400 a year if you've never switched. Savings are lower if you have but worth checking every six months. Compare using This is Money's fuel finder.
Broadband, TV and phone - Getting a bundle deal for all three will also trim back costs. Compare using This is Money's finder.Use This is Money's calculators to work out if a credit card or a loan is the best option.Switch credit cards -
If you're paying high APR then why not try and find a cheaper deal. Compare credit cards.Find the best loan - If you've done the research and think a loan is the best option then you should compare the deals. However, remember you'll need a top notch credit score to get the best.
Use This is Money's loan finder to compare the best deals.
The research also revealed that despite 28 per cent of people looking into alternative payment sources to help cover bills, only 32 per cent regularly check for cheaper deals on services like utilities or TV subscriptions.
While only a quarter of people bother to check that they have sufficient funds in their account by scheduling bills or direct debits just after payday.
Younger bill payers are more likely to borrow money to cover bills, with 38 per cent of people aged 18-34 doing so.
This is compared to 30 per cent of those aged 35 – 54 and 17 per cent of over 55s.
More people in London use loans to cover 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.