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Outstanding credit card debt rises by 10% in October

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Written by: Rebecca Goodman
19/01/2023
Credit card spending was 15% higher in October, when compared to the previous year, while outstanding debt rose 10%, according to UK Finance.

This may be an indication that rising prices fuelled by the cost-of-living crisis are pushing more people to rely on credit.

The trade body also said that big variations between 2021 and 2022 are to do with pandemic lockdowns and the reopening of the economy.

Yet credit card balances that aren’t paid will accrue interest, becoming an increasing financial burden to those already in debt.

Boost in credit and debit card spending

There were 2.2bn debit card transitions in October, 12.4% more than the previous year, and the total spend was 9.1% higher, at £66.6bn.

For credit card transitions, there were 354.6 million, an 11.3 rise from October 2021 and spending was up 15% to £19.2bn, according to the latest card spending data from UK Finance.

Worryingly, the amount left to pay on credit card balances rose by 10.1% over the 12 months to October. Of those, customers were paying interest on 51.2% of balances, compared to 53.7% a year ago.

These figures were for transactions made both in the UK and overseas by UK customers.

It comes as news this week shows a third of adults have now used buy now, pay later (BNPL) services, with 4.1 million people using this type of credit for the first time in 2022, according to Equifax.

‘Turning to credit to make ends meet’

Helen Morrissey, senior pensions and retirement analyst at Hargreaves Lansdown, said: “We are continuing to splash the cash despite the cost-of-living crisis with this data showing total spend rising on credit and debit cards.

“This could be a sign of early Christmas cheer as people start shopping or, more depressingly, show just how much the price of our day-to-day items have risen.

“For a long time, the money people were able to save during the pandemic gave them a decent buffer against these rising prices. However, as the money runs dry, and people have economised as much as they can, we are increasingly seeing people turn to credit to make ends meet.”

Rise in contactless payments

The data also showed an increase of 14.4% in contactless payments made in the UK during October, to 1.5 billion. The value of these transactions was £23.2bn, a 42 per cent increase on £16.3 billion in October 2021.

There was a rise of 24.8% in contactless credit card payments and 13% in debit card payments. This rise also coincides with an increase to the contactless card limit, to £100 in mid-October 2021.

In October 2022, there were 101 million debit cards in circulation, 93 million of which were contactless and 60 million credit cards, 54 of which were contactless. There were also 54 credit card accounts and 37 million of these were active.

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