More Britons running up credit card debt, report
As the cost-of-living crisis grinds on, UK families have been using more debt to cover their bills as inflation has been stretching household finances, according to new research.
Debt on credit cards climbed 8.7% in the year to June, data from UK Finance, the lobby group for bank shows, as consumers turn to riskier forms of finance to maintain spending, The Times newspaper reported.
Credit card transactions in the UK and overseas also climbed 7% annually in June, while the total value of credit card sales jumped 8.3% to £20.7 billion. Debit card sales also rose 8.2% to £65.3 billion, some 5% higher than in the same period last year.
The Bank of England said in July that 10% of households spent 80% of disposable income on servicing debt, up marginally over the last year.
And while some of the credit card spending might be good for retail in the short term, in the longer term, cash-strapped consumers struggling with debt are bad news for stores, especially those covering discretionary categories like fashion and beauty.
Higher credit card rates have been driven by the BoE lifting the interest base rate 14 times to 5.25%. On Thursday, the monetary policy committee is poised to lift borrowing costs again, by 0.25 percentage points, the report claims.
On the plus side, rising credit card transactions might also suggest that consumers are confident of their ability to repay debts.
Price growth dropped to 6.8% in July, but figures out tomorrow from the Office for National Statistics are expected to show inflation was 7% last month after petrol prices rose.
Wage growth of 7.8% in the three months to July beat inflation for the first time in nearly two years, raising hopes that a recovery in living standards will stimulate spending and growth.
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