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Credit card lending levels off in 2019

Written by: Paloma Kubiak
Credit card lending in 2019 has bucked the consistent trend of growth, which is “highly unusual” according to a charity.

In the year to October 2019, outstanding credit card balances grew by just 0.18% – £130m or an average £2.48 per adult. This comes after consecutive falls recorded in July, August and September 2019, according to Bank of England statistics.

Last year saw a 3.9% rise, a 5% increase was reported in the year to October 2017 and 5.5% was recorded in the year to October 2016.

The Money Charity said that after years of “considerable, rapid growth”, credit card lending across the UK has levelled off, which could be due to the financial watchdog’s rules on persistent credit card debt.

Under these rules, lenders have a responsibility to proactively help manage the debt of consumers with persistent credit card debt, measured over a three-year period. Early 2020 marks three years since their implementation.

Erik Porter, acting chief executive of The Money Charity, said: “After years of credit card balances climbing ever higher, this plateauing immediately stands out as highly unusual, and with the first real effects of the new rules on the horizon, the link seems clear. Moreover, a number of the advice charities we liaise and speak with are already seeing and reporting an upsurge in enquiries on credit card debt.

“Credit cards were not designed to be a financial product consumers would use for long-term debt. They were short-term ‘quick fixes’ to help users with temporary fluctuations in income/expenditure, hence their typically high interest rates. The considerable growth in their prevalence for heavy levels of unsustainable indebtedness was always a looming major issue. We therefore welcome the new rules and the intent to draw people out of debt towards financial wellbeing, but remain concerned that too many will simply choose to shift their debt elsewhere, potentially to products with even more unsustainable rates.”

As part of The Money Charity’s December 2019 money statistics, it revealed that total unsecured consumer debt increased by 3.24% (£7bn) in the last year, while mortgage debt increased by 2.82% (£39.5bn). The increase in mortgage debt was roughly the same as the Government’s entire fiscal deficit in 2018-19 (£41bn).

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