Credit Card debt sees highest growth since the Recession

Posted by Ben Tumilty in Dealing with Debt on 2 November 2016 - Ben is a Credit Analyst at checkmyfile

Household credit card debt increased by more than £500m in October, pushing the amount owed on credit cards to £66bn – roughly £2,400 per household in the country.

The Bank of England’s figures show that credit card debt has rocketed by 8.4% over the last 12 months – not since November 2008, in the middle of the recession, have we witnessed a greater annual increase in credit card debt.

The release by the BoE has divided opinion. Some economic experts are pleased to see this, as it suggests consumer confidence may be on the increase, and that people are looking to cash in on introductory offers, lowering interest rates and are generally happier to be spending money.

On the other hand, consumer campaigners and debt charities will not welcome this news. The major concern from this area is that people are borrowing more than they can afford to pay back, as people are tempted by the zero percent introductory offers but fall foul of this by not clearing the balances before this period runs out, or being on the receiving end of charges and fees.

Commenting on the findings, Stepchange’s Peter Tutton explains, “Credit cards are already the most common type of debt we see and we are concerned that increased lending could see even more people fall into problem debt.”

Tutton expresses concerns that we may end up in the same boat as we were before the recession, where too many households had uncontrollable credit card balances, and that the increase in borrowing may spiral into genuine debt problems.

Stuart Carmichael from the Debt Support Trust suggests that some of these consumers in financial difficulties should not be provided with credit in the first instance, and says it is “frightening” how quickly that UK credit card debt has grown.

Some lenders are starting to pick up on this – in a separate release, Virgin has confirmed that it is looking to tighten its internal requirements for credit card application, as its release shows that their credit card holders had racked up £2.2bn of debt just in the first 9 months of the year. This figure is startlingly high, even more so when compared to the £1.6bn accrued in the entirety of 2015.

If you are concerned about your financial situation it is advisable to seek some impartial financial advice, for example through Citizen’s Advice, Stepchange or numerous other debt charities.

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