New debt boom fear as spending on cards spirals to a new record
SPENDING on credit cards is growing twice as quickly as it was last year, it emerged yesterday.
On the tenth anniversary of the start of the financial crisis, industry figures revealed how households are increasingly reliant on credit.
Some £16.5billion was spent on credit cards in June, up 6.9 perand £1.1billion more than was spent in June last year.
It is also more than double the 3.4 per cent growth in the year to June 2016, according to UK Finance, which represents Britain’s lenders.
The number of purchases made on credit cards also jumped by 9 per cent to £304million. This was driven in part by consumers using contactless cards to pay for smaller, everyday purchases.
The acceleration in credit card spending emerged as Lord Darling, who was chancellor during the bailouts of Northern Rock, Lloyds and Royal Bank of Scotland, said rising levels of household debt and uncertainty over Brexit should ‘raise alarm bells’ for the economy.
Speaking to BBC Radio 4’s Today Programme, he said the financial system was now safer but warned ‘regulators must remain ‘very very’ vigilant about the risks to the economy.
Focusing on household debt, he said: ‘When interest rates go up, and they will go up, if not this year then certainly next year, and suddenly people find they are going to be paying more in
‘We risk repeating mistakes of past’
their monthly payments, that’s when you need to watch out.’
The figures published yesterday only reveal the amount spent on credit cards, not the amount paid back.
But debt is mounting on credit cards at the fastest pace since the financial crisis, when a record £68.2billion was owed on credit cards. Regulators say this has been fuelled by the rise of 0 per cent teaser rate credit cards which encourage people to go on guilt-free spending sprees.
More than £200billion is now owed on short term loans – including credit cards, overdrafts and personal loans, according to Bank of England figures. This has also been driven