CREDIT CARDS

Credit card usage falls but payday loans are on the rise

The number of Brits taking out and using credit cards is falling, however, borrowing is fast being replaced by high interest payday loans.

According to the latest figures from PricewaterhouseCoopers (PwC), UK households paid off some of their unsecured debts in 2011, but they were still left with an average of £7,900 debt.

Credit cards are facing a ‘mid-life crisis’ as people are turning to payday loans as a faster alternative to accessing cash.

The report found that credit cards are ‘feeling the strain’ as Brits need to rely on other means of gaining money faster.

The PwC found that the number of credit cards in circulation and the total amount borrowed on them over the last 12 months has fallen, suggesting that UK consumers were turning to other forms of payment. Despite this, the average credit card balance was at around £1,000.

Simon Westcott, Director of PwC’s Financial Services practice, commented:

“UK consumers are among the most indebted in the world, with the average UK household still saddled with nearly £8,000 of unsecured debt. Although the UK Government’s austerity drive appears to be hitting home, with households paying off an average of £355 worth of their debt in 2011, three years of austerity by UK consumers has only made a small dent in the total levels of borrowing.”

The total outstanding credit fell by 5% last year, declining at a faster rate than the previous year.

“45 years since it was first introduced, the credit card is suffering a midlife crisis. Consumers discarded nearly one million cards in 2011, taking the number of credit cards in circulation down to levels not seen for almost a decade,” continued Mr Westcott

The report highlighted that 18 - 24 year olds are the most sceptical about taking on credit as they do not believe they will be able to repay their debts. However, 25% of those aged 24 – 35 claim that they needed credit cards to fund their essential purchases.

Tags: Brits debt, compare credit cards, CREDIT CARDS, Payday loans