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Evidence shows that more and more British consumers are paying with plastic, as figures show a rise in the use of credit and debit cards.
The number of transactions carried out on cards grew by a whopping 12% in the year to the end of June – the highest annual increase since 2008.
Released by UK Finance, the figures also show that spending on cards is rising five times faster than earnings.
As well as an increased appetite for card payments and contactless transactions, the accelerated spending on cards is underscores an alarming rate of growth for borrowing at a time when price are increasing and wage growth is slow.
The consumer price index showed a 2.6% rise in July of this year, while wages only increased by 2.1%.
The value of the spending on cards also showed a rise, accelerating to 7.2%. The Bank of England has made repeated warnings about the need for financial vigilance, particularly from lenders.
The Bank’s Prudential Regulation Authority (PRA) has given purveyors of popular credit products including loans, credit cards and car finance deals until September to show they are operating responsibly.
The Bank of England has expressed more specific concerns about individuals taking on high levels of personal debt, creating repayment issues for themselves in the future.
One specific issue that the PRA wanted to see addressed was the sharp increase in the length of 0% credit card balance transfer offers. Some of these interest-free deals can last as long as 43 months.
Peter Tutton, head of policy at StepChange debt charity, told the BBC: “With our research estimating 3.2 million people are using credit cards to pay for everyday household expenses, the growing stock of credit card debt should focus attention on households in financial difficulties. The growth in borrowing through credit card cash advances is particularly concerning as this can be an expensive form of borrowing and can be a risk indicator of increasing financial difficulties.
“The Financial Conduct Authority must ensure credit card lenders are acting responsibly, making robust affordability checks and intervening quickly to help people struggling with credit card or multiple credit card debts.”
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