Skyrocketing Credit Card Debt in the UK: A Worrying New Trend?

British consumers borrowed a record amount from their credit cards in February, prompting an economist to speculate that the economic recovery “is about to kick into high gear”.

Data released by the Bank of England showed individuals borrowed a net £1.5billion on credit cards, the highest monthly amount since records began in 1993, noted It’s money.

The figure was more than three times the average of £400million borrowed in the previous six months, pushing total consumer credit, which includes personal loans and car dealer financing, to £1.9billion net pounds – the highest level in five years.

Meanwhile, the latest bi-monthly survey from the Office for National Statistics found that 12% of respondents were using credit cards more than usual to cope with rising prices in the first half of March. The proportion rises to 18% among 30 to 49 year olds and 21% among renters.

the FinancialTimes noted that although consumer borrowing is generally seen as “a measure of spending growth”, with inflation at its highest level in 30 years and consumer confidence falling, some believe it is a a sign that consumers are “going into debt to maintain their standard of living”.

“The sharp increase in consumer borrowing in February likely reflects attempts by households to hold consumption steady at a time when real disposable income is falling sharply, rather than embarking on a spending spree,” said economist Samuel Tombs. chief of the consulting firm Pantheon Macroeconomics.

He added that the figures “suggest that the economic recovery is about to kick into high gear”.

Thomas Pugh, a British economist at accountancy firm RSM UK, agrees, saying the latest figures “suggest consumers are borrowing more and more to protect their lifestyles from soaring inflation.”

However, says The Guardiansome experts believe that the increase in credit card spending, which followed the lifting of restrictions on the Omicron variant, may show a boost in consumer confidence before Russia invaded Ukraine.

Paul Dales, chief UK economist at consultancy Capital Economics, said: “Households are more likely to have had the confidence to borrow and spend a bit more and/or were willing to use borrowing/ savings to smooth out their spending.”

Therefore, Dales predicted, “the economy may have a bit more short-term momentum than we thought.”

Anti-poverty charities remain concerned. Joanna Elson, chief executive of Money Advice Trust, the charity that runs National Debtline and Business Debtline, said the figures provide “an indicator of the underlying challenges households face in coping with the rising cost of life”.

Calling on Rishi Sunak to provide more help to households under pressure, she added: ‘Our concern is that more people will be pushed into credit to cover rising bills, which could pile up problems later when repayments are due. .”