CREDIT CARDS

British borrowers gain confidence in summer sun

Although lending through store cards, credit cards and in-store instalment credit remain low, statistics show that Brits borrowed slightly more money in August this year compared to 2010.

The latest Finance & Leasing Association (FLA) report shows a slight increase in consumer credit lending in August, but also stated that this doesn’t signify a recovery across the credit markets yet.

The total amount of new consumer finance in August was 3% higher than in August last year, but in the overall 12 months to August it was down by 2%. The FLA suggested the slight increase in August is likely to be due to holiday spending.

On top of this, the amount of second mortgages, credit cards and loans, as well as payment to stores through instalments, also fell.

Year on year difference

Figures showing a comparison between August 2010 and August 2011 reveal a generally decreasing trend. Store cards, credit cards/personal loans and second mortgages all fell by 4%; store instalment credit reduced by 20%.

In relation to this, a recent report from the UK Cards Association also showed a change of attitude in the way Brits use both credit and debit cards, revealing a sharp reduction in the use of credit cards generally from 2005.

From 2005 onwards, Brits took a more cautious attitude towards money as two million more adults decided not to use their cards for borrowing, paying off their balance (in full) each month instead.

As the UK Cards Association says, this ‘responsible spending’ trend continues today. A majority of 62% of cardholders paid their full balance each month last year, compared to 55% in 2005. The over-45 age group accounts for the majority of this change, according to the report.

Used correctly, credit cards are a sound financial product that allow costumers to borrow extra money for their purchases. However, it also can lead its users to a potentially unstable financial situation if the amount of debt becomes too high to manage.

Tags: consumer credit lending, CREDIT CARDS, credit market, in-store instalment credit, store cards