Outstanding debt on UK credit cards rose by almost 10 per cent last year as households resorted to borrowing in the face of inflationary pressures and the cost of living crisis, according to new data.
Figures from banking association UK Finance show that credit card debt rose by 9.7 percent in the 12 months to December last year.
The number of credit card transactions rose 3.8 percent year-on-year to 371.4 million, while total spending increased 3.7 percent to £19.2 billion.
The increasing use of credit cards suggests that households are resorting to credit to pay bills and other expenses in the face of inflation and rising living costs. Inflation has proven stubborn over the past year, peaking at over 11 percent in October 2022.
UK Finance’s figures come after the Financial Ombudsman Service revealed earlier this month that the number of complaints about credit cards in the UK reached an all-time high between October and December last year, up 76 percent year-on-year.
Consumers criticize lenders for what they believe are excessive interest rates and credit limits.
Recent data from the Bank of England shows that the effective interest rate on interest-bearing cards reached a record high of 21.29 percent in January.
Figures from financial information website Moneyfacts show that the cost of credit card loans hit an all-time high between September and December last year, while interest rates on personal loans were at their highest level in a decade.
UK Finance data showed that total debit card spending fell 1.4 percent to £68.4 billion last year. Transactions made with debit cards still far outstrip those made with credit cards, rising 2.3 percent to £2.28 billion in 2023.
The Bank of England is expected to keep its key interest rate at a 16-year high of 5.25 percent at its meeting on Thursday.
