By Mark Fairlie.
The level of combined credit card debt across all accounts in the UK rose by £400m taking the total to £72.5bn, according to the Bank of England.
The Bank stated that, after adjusting for inflation, the amount owed by British consumers is slightly below the amount owed in the first quarter of 2010 after the Great Recession of 2008-2009. The Bank also warned that the average amount of interest paid on credit card debt was higher than during that period and that the average UK household owed £2,688 on credit cards, an annual increase of 7.9%.
The Independent reports that the amount of credit card debt has increased every month since July 2013 because wage growth has been below the rise in the cost of living save for a reverse in the final quarter of 2018. In October, the Bank’s chief economist, Andy Haldane, stated that insecure work and the gig economy had contributed to a “lost decade” of wage increases in Britain, and that, in the middle of 2018, workers received, in real terms, £11 less per week than before the Great Recession.
Debt charities have warned that “persistent credit card debt could become a major problem for households”, as reported in This Is Money.
UK homeowners now owe an average of £15,385 to credit card firms, lenders, and banks, according to the Trades Union Congress (TUC). The TUC, however, included a wider range of debts in its calculations in comparison to the Bank, according to BBC News, including student loans which, store cards and payday loans according to the site “was half the TUC’s estimate.” In 1998, indebtedness per household, according to the TUC, was £5,456 rising to £11,146 during the peak of the Great Recession.
Speaking to The Times, general secretary Frances O’Grady stated that household debt was at “crisis level [following] years or austerity and wage stagnation” and that the government was relying on the accumulation of debt to drive growth in the economy.
The same paper reported that consumers are beginning to reduce their overall level of spending as applications for new loans had slowed down in the first few days of 2019.
Phil Andrew, CEO of StepChange, a major UK debt charity, described the growth as “relatively modest in percentage terms” but expressed caution about the £400m jump in credit card borrowing, suggesting that “vigilance was necessary” moving forward.
The TUC’s research suggested that the rise in personal debt was, in part, caused by the rise of the “gig economy” and the number of workers on “zero-hours contracts”. It cited research by mobile app company Wagestream which stated that the average employee was £252 more in debt because of spending through the festive period whereas “shift and gig” workers were £352 more in debt. Participants in the survey believed that, on average, they would not be able to settle Christmas debts until May 2019.