Douglas Melville, the Channel Island Financial Ombudsman, and Malcolm Ferey, Citizens Advice chief executive, have both reported increased cases of young people suffering financial hardship due to greater day-to-day use of debit and credit cards.
The pair both said that increasing use of contactless payments, chip and pin and online subscriptions had made it easier to spend money, which was undermining financial discipline.
They said that young people, many of whom may have barely ever used cash, were their biggest concern.
Last year Citizens Advice reported that 283 Islanders contacted them about financial problems, compared to 119 in 2017. The average amount of money owed per case was lower, indicating that many more people were ending up struggling with smaller debts.
‘A growing issue for us is the number of young people we are seeing getting into debt,’ said Mr Melville.
‘And it is because they are increasingly using debit and credit cards instead of cash. With cash it is tangible and you are much more aware of how much money you are spending.
‘But nowadays using plastic to pay for something has become the norm for young people and some of them don’t even use cash at all. It’s so easy for them to lose track of how much they are spending.’
He added that there could be long-lasting negative consequences for young Islanders who failed to pay off even relatively small debts, such as credit-card bills.
‘It can affect their credit rating in the long term, so when it comes to getting a loan for car or a mortgage, they will end up finding it more difficult,’ Mr Melville added.
‘Even this happening on a relatively small credit card, let’s say one with a £500 limit, can have a really detrimental effect on someone.’
And he warned that vulnerable young people were most at risk because they could not rely on their parents to get them out of financial trouble.
‘Who ends up paying for this the most? It’s vulnerable young people. It’s parents who end up paying off the debts, if they can, and for the kids whose parents are able to do so, they’re OK,’ he said.
‘But for those who didn’t have that option, they end up getting negative credit ratings and can end up in a very bad situation.’
Mr Ferey said that there was a particular danger with young people signing up to online services, such as streaming subscriptions and video games providers.
‘When you can take all these little amounts which they regularly pay out and add them up, you can show them they are spending a lot more money than they think they are,’ he said.
‘There are things like online video games – which can be an addiction – and they have to pay to play them. Sometimes we will go back through people’s statements and ask them what these regular payments are and they won’t even know.’
He added that the older generation had learnt financial discipline through the use of cash, but that this was no longer the case with younger people.
‘The older generation is used to using hard cash and is more used to budgeting. In the cashless society it is not as easy to do that,’ he said.
The Jersey Financial Services Commission, Community Savings Ltd and the Jersey Consumer Council have been running sessions in the Island’s secondary schools on financial education.
Mike Jones, the JFSC’s director of policy and risk, said: ‘Our sessions cover a range of matters including sound financial decision making, an introduction to the finance industry and why it is relevant and how students can protect themselves from frauds and scams.’
