Outstanding credit card balances jumped last month
There was a significant jump in the average outstanding credit card debt last month, with outstanding credit card balances jumping by an average of 17% during the month as a result of festive spending in the previous month.
Over the course of the month the bills that customers had clocked up over the Christmas and New Year periods hit their credit cards, and this saw their outstanding debt rise by a significant amount on average.
The average credit card balance in January went up to £2168 according to a recent report. This reflected a rise from the December figure of £1842.
However, despite the rise in the level of the average outstanding balance the rise was still lower than that seen in previous years, which may be indicative of the effects of the credit crunch, which has seen consumers cutting back on their spending either to exercise caution or simply because they cannot get the additional credit that they need due to tighter lending conditions.
One industry professional stated: “There is a clear trend of falling outstanding credit card balances over the course of the last three years. The question is whether this actually reflects consumers clearing debts or merely a rescheduling of them. It’s far less easy now for so-called rate tarts to continue to hop from one credit card deal to another but what we are witnessing is a rise in other forms of borrowing, notably secured lending.”
He added: “Some consumers will be paying down their credit cards but others have been rescheduling expensive high-interest rate short-term credit card debt onto longer, structured loan products with lower interest rates. This means they will have been able to reduce their monthly outgoings but potentially at the expense of a much larger interest rate bill over the whole course of the loan repayment.”
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