Golden era of debt repayment set to be eclipsed by summer spending spree
In April, outstanding balances on credit card accounts had fallen 12% in a year to £53.3 billion, but this is down from 19% a month earlier.
There were 33.9 million credit cards with balances at the end of the month, this was down 7% from April last year.
The number of credit card accounts open in the UK has fallen 5% since last April, to 53.15 million.
There were 258 million credit card transactions in April, 57% more than a year earlier, but 14% fewer than in April 2019.
The total spend of £13.7 billion was up 59% in a year, but down 22% in two years.
54% of balances were subject to interest
Sarah Coles, personal finance analyst, Hargreaves Lansdown: “The golden era of debt repayment started fading in April, and is likely to be eclipsed entirely now the summer sending spree is upon us.
“Back in April we were still repaying more of our credit card debts than we were spending on plastic, and people continued to cut up their cards and close their accounts. However, as non-essential shops and pub gardens opened in April, the speed at which we paid off our card debts dropped significantly.
“Newer Money and Credit data from the Bank of England shows that as more of the country opened up, we found more to spend our cash on. In May, the repaying of credit card debts slowed to a trickle, and overall consumer debt actually rose. The Bank’s Credit Conditions figures out yesterday, meanwhile, showed demand for new borrowing increased in the three months to June and the banks expect it to rise again in the three months to September.
“The summer spending spree last year meant that in July and August we returned to spending more than we repaid on cards, and we can expect something similar this year too.
“However, before you dust off your credit card, it’s worth considering whether there are any alternatives. You may be able to cut costs elsewhere in your budget to free up cash to spend on the things you want to prioritise, so money you save on trading down at the supermarket or shopping around for cheaper bills can be spent on going out and having fun. Nobody can criticise people who have been locked down for so long for wanting to spend some money enjoying themselves, but we don’t have to give up our debt freedom in order to do so.”