Debt-binge Britons stick £20million a day on credit cards

Plastic spending soars at fastest rate for 11 years Fears of fresh crisis as we now owe £67BILLION

CREDIT card debt is rising at the fastest rate for 11 years amid a dangerous borrowing binge, it was revealed yesterday.

Shoppers put another £562million on plastic last month, or £20million a day, Bank of England data showed.

British families now owe a record £67.3billion on their credit cards – around £2,500 per household.

The 9.3 per cent rise in credit card debt in the last 12 months is the biggest increase since February 2006.

The binge has fuelled fears that the UK is heading for another financial crisis.

Jack Coy, an economist at the Centre for Economics and Business Research, said debt-fuelled spending has risen to levels ‘worryingly close to those seen around the financial crisis’.

The Bank this week began a major review of lending practices in the UK and warned that the scramble to borrow evergreater amounts of money was now a major risk to the economy.

Labour MP John Mann, a member of the Treasury Committee, said: ‘This is a serious issue that the Bank needs to get to grips with.’

Yesterday’s Bank report also showed total unsecured debt – including credit cards, personal loans and car finance but not mortgages – hit a record £196billion in February.

Debt levels were 10.5 per cent higher than a year earlier, underlying the rapid pace at which British households are borrowing money to make ends meet.

Consumer credit, excluding mortgages, has now been rising by 10 per cent or more year-on-year for ten months in a row.

The last time household debt was mounting at such a worrying rate was in 2005 as Britain hurtled towards the worst financial crisis since the crash that triggered the Great Depression of the 1930s.

Former pensions minister Ros Altmann warned that ‘building an economy on debt usually ends in disaster’, particularly for those who borrow more than they can pay back.

Families have been encouraged to take on more and more debt by record low interest rates which make borrowing cheap and penalise savers.

Howard Archer, chief UK and European economist at research group IHS Markit, said that until now ‘relatively confident consumers have been generally keen to take advantage of low interest rates to borrow’. But he warned that the tightening squeeze on household incomes ‘will likely increase the need for some people to borrow’ in the coming months.

It is feared that rising prices and subdued pay growth have forced some households to borrow money to pay the bills or maintain their living standards.

Rising fuel and food prices have driven inflation to a three-and-ahalf year high of 2.3 per cent.

This has been piling pressure on workers and savers whose incomes are now being eroded by higher living costs.

Credit card companies have been fighting for business by offering customers long periods of up to 40 months where no interest is payable on the debts they rack up. But they charge hefty interest rates after that – and campaigners have warned this long period of guilt-free shopping only encourages buyers to spend even further beyond their means.

StepChange Debt Charity was contacted by a record 600,000 people seeking help in 2016.

The average unsecured debt of its clients increased for the first time in eight years, from £13,900 to £14,251.

Peter Tutton, head of policy at StepChange, said: ‘We urgently need action to prevent more households falling into unmanageable debt.’

Gillian Guy, chief executive of Citizens Advice, said: ‘While households are struggling to meet everyday costs like rent and bills, the amount that people are borrowing on credit cards is also continuing to rise.

‘Turning to credit without a plan about how to pay it back can lead to spiralling debt.’

The Financial Policy Committee, the arm of the Bank tasked with preventing another crisis, this week warned ‘consumer credit has been growing particularly rapidly’ in recent months.

‘This could principally represent a risk to lenders if accompanied by weaker underwriting standards,’ it said. ‘These standards should be monitored closely.’

Meanwhile, the Financial Conduct Authority regulator is looking into how individual banks decide what customers can afford to borrow.

‘Fears of another financial crisis’