Is there a balance between saving and paying off debt?
Among Trust Deed Scotland® customers, 77% say credit card debt is what worries them most, yet almost half wait a year or more before asking anyone for debt help in Scotland. That gap between the anxiety and the silence says a lot about how normal it’s become to carry debt quietly, even as it grows.
This week marks UK Savings Week, an annual campaign launched by the Building Societies Association in 2022 to get the nation talking about savings habits, whatever stage you’re at.
It’s a good prompt, but for a lot of people right now, “build up your savings” is easier said than done. With the cost of living still squeezing household budgets across Scotland, many of us are getting by with little or nothing set aside. Research from the Financial Conduct Authority found that one in ten UK adults have no cash savings at all, and a further 21% have less than £1,000 to fall back on in an emergency. If that sounds familiar, you’re far from alone.
Having no savings does not mean you have failed to manage your money. When the cost of food, energy, housing and other essentials keeps rising, there may simply be nothing left to put aside.
For some households, the challenge is not deciding how much to save. It is working out how to make their income last until payday without borrowing again. If every pound already has a purpose, advice about building an emergency fund can feel unrealistic and even discouraging.
If that is where you are, the immediate priority does not have to be saving. It may be making sure your essential bills are covered and understanding whether the debts you are being asked to repay are still affordable.
Recent research from the Scottish Building Society backs this up on a local level too. Nearly three in four Scots say the economic climate has negatively impacted their finances, and two-thirds have had to dip into savings just to cover day-to-day costs. As the society’s own chief executive put it, this isn’t really a savings problem anymore, it’s a resilience problem, with money increasingly needed to cover today’s costs rather than build tomorrow’s security.
So as UK Savings Week encourages us to think about our savings habits, and Black Friday deals start landing in your inbox with Christmas creeping closer, the usual money question comes round early this year. Should you be building up savings for the festive season, or focusing on clearing the debt you’re already carrying? For a lot of households, there isn’t much room to do both.
Interest on credit cards and overdrafts is almost always higher than what you’d earn on savings, so carrying a balance typically costs you more than any savings pot earns you back. On paper, overpaying expensive debt usually wins. But that’s only true once your essential bills are covered. Rent or mortgage payments, council tax, and gas and electricity bills carry more serious consequences if they’re missed than a credit card does, so those come first regardless of interest rates.
The impact of credit utilisation on your monthly budget
A credit score can be useful, but it does not tell the full story of someone’s financial position. You could still have a reasonable credit score while relying on credit to cover essentials, making only minimum payments or using most of the credit available to you.
Likewise, having access to more credit does not necessarily mean that further borrowing would be affordable. Lenders consider their own criteria, including income, existing commitments and recent payment history, rather than relying on one score alone.
High credit utilisation can also make the idea of maintaining a ‘good’ credit rating difficult to define. If your cards are close to their limits and interest is absorbing much of each payment, you may continue paying for years without making meaningful progress on the balances. You might technically be keeping up with payments, but still have very little room in your monthly budget.
A formal debt solution will affect your credit rating and your ability to obtain credit. However, for someone whose debts are no longer affordable, protecting their current credit score may not be the only consideration. They may also need to consider how long their present repayments could continue, how much interest they are paying and whether the balances are actually reducing.
If suitable, a Protected Trust Deed typically involves making one affordable monthly payment for four years. Interest and charges on the debts included are frozen once the Trust Deed is protected, and any included debt that cannot be repaid is written off when the Trust Deed is successfully completed.
That does not make a Trust Deed the right choice for everyone. But for some people, accepting an impact on their credit file while following a defined route through their unaffordable debt may be preferable to struggling for many more years without seeing their balances come down.
There’s another layer to this that’s easy to miss too. If your credit score has taken a hit, which happens easily when money’s tight, lenders often see you as higher risk, and any borrowing or existing balances can come with steeper rates. Part of what shapes that score is credit utilisation, the percentage of your available credit that you’re actually using. If your credit card limit is £4,000 and your balance is £3,000, your utilisation is 75%. Experian, one of the UK’s credit reference agencies, suggests keeping utilisation below 25% where possible to help protect your score, though it’s only one factor among many that lenders weigh up.
High utilisation can make repayments feel unaffordable almost by design, even before Black Friday temptation or Christmas costs are added on top. When cards are close to their limit, minimum payments start eating up more of the monthly budget. And if a 0% offer ends without another deal to move to, interest can build quickly. It becomes a cycle. Stretched budget, high utilisation, higher cost of borrowing, less room to pay it down. It’s a pattern we see often here at Trust Deed Scotland®, and it’s rarely about poor money management. It’s about the numbers simply not adding up any more.
Personal finances cannot always be reduced to a simple calculation. A repayment plan might work on paper, but that does not mean it leaves enough for food, heating, travel, children’s costs or an unexpected expense.
Put every spare pound towards debt with nothing set aside, and one broken boiler or car repair, or one too many Black Friday bargains, can send you straight back to borrowing. MoneyHelper suggests three to six months of essential outgoings as a longer-term savings target, but for a lot of people right now that will feel out of reach, and it doesn’t need to be the starting point. Even a small buffer, built up gradually, can take the edge off an unplanned cost instead of adding to the debt pile, which is really the spirit behind UK Savings Week too.
It’s also worth looking at what kind of debt you’re carrying. High-interest credit cards and short-term borrowing are usually the ones to tackle first. If you’re eyeing up a 0% credit card for Black Friday or Christmas spending, you’ve got a bit more breathing room, just make sure there’s a clear plan to clear it before interest kicks back in, rather than assuming another 0% deal will be there when this one ends.
Longer-term goals still matter too. However, paying debt for a long time does not automatically improve your overall financial position. If most of each payment is being absorbed by interest, or you need to borrow again to cover essentials, the balance may reduce very slowly or not at all. In those circumstances, it may be more helpful to look at the full position rather than focusing on the credit score alone.
There’s no single right answer. For most people it isn’t save or repay, it’s finding a balance that doesn’t leave you stretched too thin either way, especially heading into the most expensive time of year. The right approach is one that is realistic, affordable and does not leave you constantly short of money.
If you’re already using credit to cover essential bills, regularly maxing out your limits, or borrowing again shortly after making repayments, it might be a sign the issue is bigger than finding the right balance between saving and overpaying. That’s when it’s worth talking to someone. At Trust Deed Scotland®, we do debt advice your way.
Use our online Trust Deed Wizard for a look at your options, request a call at a time that suits you, or message us on WhatsApp to start a private, no-pressure conversation.
However you’d rather start the conversation, we’re here to listen.