Credit card debt increases again

Credit card debt is on the rise again as consumers borrow more on plastic, new data has suggested.

The Finance and Leasing Association (F…

Credit card debt is on the rise again as consumers borrow more on plastic, new data has suggested.

The Finance and Leasing Association (FLA) figures for May have indicated its members lent one per cent more on cards and personal loans than they did in the same month in 2011.

And the figure was up two per cent for the three months ending in May compared with the equivalent period last year.

Such an increase was just a part of an overall rise of nine per cent in borrowing in May this year compared with 12 months before.

Major increases included a 28 per cent increase in in-store credit, while car finance was up 24 per cent and second mortgages by 17 per cent.

FLA head of consumer finance Fiona Hoyle said: "In-store instalment credit is proving increasingly popular with consumers, who are responding to the attractive and flexible offers which are available.

"This is helping customers buy essential household goods, at a time when many families have to manage their budgets even more carefully."

By contrast, there was a 16 per cent fall in store cards, which may suggest some consumers are using debt consolidation measures to reduce this form of indebtedness as such accounts tend to carry high interest rates.

Good budgeting is essential for many people whose buying power is constrained. A combination of seeking out the cheapest credit available when they do borrow and keeping down cost by good debt management practices can help make ends meet more comfortably.

Coping on a budget is something many families struggle to do because a quarter of the UK population have less coming in than what the Joseph Rowntree Foundation has termed the Minimum Income Standard.

Its report out this week claimed the typical family with dependent children needs £36,800 to live comfortably, with this increasing by £5,000 in the last four years due to increases in the cost of energy, food, petrol and childcare.

Posted by Paul Thacker
 

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