Credit card borrowing on the rise

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UK households had a combined credit card debt of £66.7bn in the year to November, figures from the Bank of England show.

The Bank’s monthly Money and Credit report claims consumer credit, which includes car loans and second mortgages as well as credit cards, has risen at its fastest rate in 11 years, up 10.8% over the last 12 months to reach £192bn in total.

It’s perhaps no surprise, considering how intense competition between credit card companies for customers in the last 12 months has seen many lure in new clients with 0% interest rates for longer periods of time. As a nation, balance transfer deals have also made us worryingly ‘skilful’ at shuffling debt from one company to another.

Another reason experts cite for the soaring popularity of credit cards is the gradual transition to a digital economy. How many of us still carry more than £10 of cash in our purses or back pockets? Exactly. Instead, cards can be used for everything from tapping in on the tube to buying a sandwich at the local corner shop. As such, it’s increasingly difficult to keep track of spending when the ‘magic wand’ of plastic keeps our finances at a comfortable short-term remove.

Not for much longer, it seems. The Office for National Statistics’ UK consumer price inflation figures for December 2016 show that inflation rose by 1.6% in the year to December 2016. Some experts suggest this signals the beginning of a slow squeeze on household budgets which, for those already in a precarious financial position or with outstanding debt, could be the tipping point.

Throw the hangover from Christmas into the equation too (research conducted for National Debtline recently found that one in three Brits (33%) put Christmas on credit last year, and more than one in ten (11%) are likely to fall behind with their finances at the start of 2017 as a result of Christmas spending) and it’s thin ice for many families.

Joanna Elson OBE, chief executive of the Money Advice Trust, the charity that runs National Debtline, said there has already been a “surge” in people contacting them for advice.

She added: “Consumer credit continues to soar, and this is something we should all be concerned about amidst the current uncertainty over the UK economy.

“We would urge households to review their financial position carefully before taking on any new borrowing, and consider how they would cope with the repayments in the event their circumstances take a turn for the worse.”

One alternative is to ditch the credit cards altogether and instead use a prepaid option, such as the Union Prepaid Plus Cashback card. Cardholders can only spend what they load onto it, making it extremely difficult to go overdrawn. Their budgeting is rewarded with cashback deals both online and in-store, so rewarding conscious spending.

Readers affected by the credit card issues covered in this post can contact National Debtline for free advice at or on 0808 808 4000, Monday to Friday 9am to 8pm and Saturday 9.30am to 1pm.

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