Credit card debt is growing at its fastest rate since before the financial crisis, fuelling fears that a large number of households could be squeezed by stagnant earnings and high inflation.
Figures from UK Finance show an annual growth rate in outstanding credit card debt of 8.3% in February, the highest for 12 years. This was also faster than the 6.3% growth rate seen among cards from high-street banks.
Credit card debt now accounts for around £70bn of the UK’s £200bn personal debt total – which is also at its highest since the credit crunch.
More regular use of credit cards for smaller, contactless purchases “explains in part the greater debt being built up over short periods”, says the BBC.
However, a study earlier this year carried out by officials at the Bank of England and the City regulator, the Financial Conduct Authority, found British consumers are trapped by credit card debt for longer than previously thought.
Nine out of every ten pounds of outstanding credit card debt in November 2016 was owed by people who were also in the red two years earlier, according to the study.
The Bank of England “has become increasingly worried about the boom in personal debt over recent months, forcing banks to beef-up their financial reserves to protect against any losses”, says The Guardian.
To this end, the FCA has given credit card companies until September to implement rules designed to help the estimated 3.3 million UK customers in persistent debt.
These include prompts to encourage people to pay back their debts faster and, after three years, more in-depth guidance and the possibility of interest and charges being waived.