Yahoo Finance UK credit card debt reaches record high
UK credit card debt hit a record high in 2018, more than doubling since the turn of the century – but it’s not all doom and gloom, according to figures released Friday.
UK Finance’s Household Finance Update for December shows the amount of money owed on credit cards was £44.8bn ($60bn) at the end of the year — the highest since the trade association began gathering the data in 1997.
The outstanding level of credit card borrowing in the UK grew by 4.7% in 2018, and credit card spending in December was a massive £11bn — 3.8% higher than in 2017.
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However, Laura Suter, personal finance analyst at investment platform AJ Bell, notes these figures highlight that we are “increasingly changing the way we spend as a nation.”
“More Brits are using their credit cards as a payment method and paying off the balance each month, in order to benefit from the cashback or other perks a number of cards offer,” Suter said.
“This shows that some spenders are being savvy and getting the most out of their spending. But spenders are split in two, as the total debt we owe as a nation on credit cards continues to grow, with interest racking up for those who can’t afford to pay off their balances or switch to a better rate.”
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Just under 45% of credit card balances have no interest, according to UK Finance, as borrowers have either secured a 0% deal or clean their balance in full each month.
Some good news is the amount people borrowed in their overdrafts dropped by 3% over the year, while the amount owed in personal loans fell by more than 5%. Bell noted these figures also highlight “a shift in the way we are borrowing.”
People also tucked away more money for a rainy day in 2018, causing the amount held in savings to increase by about 2% over the year to a total of over £1.5bn.
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The amount held in easy-access bank accounts continued to rise, in keeping with long-term trends. However, savers are losing out in real terms as these savings earn less than the current rate of inflation.
Brits aren’t the only ones excessively relying on credit cards. American households carried roughly $7,000 (£5,300) in revolving credit card debt in 2018, compared to $6,000 (£4,550) the previous year.