Credit card debt growth at 12-year high

Debt on UK credit cards is growing at the fastest rate since before the financial crisis, figures show.

The more regular use of these cards for smaller, contactless purchases explains in part the greater debt being built up over short periods.

However, figures from UK Finance show that the annual growth rate in outstanding credit card debt of 8.3% in February was the highest for 12 years.

New rules to protect credit cardholders from persistent debt take effect soon.

A series of measures, starting by September, begins with prompts to encourage people to pay back the debt faster, and leads on to more in-depth guidance after three years, and the possibility of interest and charges being waived.

The annual growth rate of outstanding debt across the credit card market of 8.3% in February was faster than the 6.3% growth seen among cards issued by High Street banks.

Credit card debt is growing at a much faster rate than other forms of debt, such as loans and overdrafts.

Eric Leenders, managing director of personal finance at UK Finance, pointed to the more regular use of credit cards in day-to-day purchases.

There were 220 million credit card transactions made across the UK in February, a rise of 3.3% compared with the same month a year earlier.

Many of these would be contactless payments, when cardholders use their credit card instead of a debit card. This might be for convenience, in order to build up loyalty points, or to ease financial pressures before pay day.

Source: FCA