Britain’s Favorite Form Of Debt – The UK Credit Card

The growth of UK credit card use in the past 10 years has been nothing short of exceptional. Today, credit card debt in the UK can rightly claim the mantel of being the “Britain’s favorite for of debt”. If you are in any doubt about this, consider:

• there are now more credit cards issued in the UK than people
• every second of every day in 2005, 282 plastic transactions took place
• 63% of all spending in the UK in 2005 was on a plastic card
• the average consumer finance debt in the UK, which includes credit card debt, has grown by over 50% in 5 years
• the average UK household owes over £4,000 in unsecured debt
• as at April 2006, total outstanding credit card debt stood at £56 billion
• almost 75% of credit card users in the UK had interest bearing balances
• the average interest rate on a UK credit card is 15.5% - 11 points above base rate!
• nearly 40% of all Brits have overspent on their credit card and can no longer manage their credit card debt

Simply put, these are extremely worrying signs of an out of control trend. So why are we Brits so in love with credit card debt?

The answer to this question is actually much easier than you may think. With over 1,300 credit card providers in the UK today, obtaining a UK credit card has never been easier. Recent reports suggest that 9 out of every 10 credit applications were issued a credit card without the credit card provider carrying out any credit check to see if the cardholder could repay the line of credit borrowed! That’s right, it doesn’t really matter now whether or not you have a bad credit history, UK credit cards are freely available to everyone without regard to their financial means. Add to this the “feel good” factor of continued economic growth, and it is not hard to see how why so many of us love our credit cards. Nonetheless, some sort of control of our credit card spending is going to have to take place if we want to regain control of our long-term financial future. How, you may now be asking, can this be achieved?

The latest figures available show, for the first time in a decade, UK credit card debt on the decline. This is not to say that we are moving away from using plastic, because we are clearly not. However, many of us are now electing to use other forms of plastic, notably the debit card, which do not accrue large debt balances, as the payment is automatically deducted from our bank balance. In part the reason why this change in trend is happening now is because of ongoing highlighted concerns about both credit card misuse in the UK and credit card providers taking advantage of their cardholders. A recent example of this has been the Office of Fair Trading (OFT)’s recent report on excessive interest and fees being charged by credit card providers.

The only question that remains: how much longer can the credit card retain its place as Britain’s favorite form of debt?

External Links:

• CREDIT & DEBT - Advice on all forms of credit and debt from the FSA
• Choosing And Using - help from the free website on choosing a new credit card offer

Additional Reading:

• Causes and Cures Of Credit Card Debt
  For some, credit cards can prove a temptation too far, and soon they find themselves in debt. Simple precautions will keep the savvy card holder from such dangers.