Revealed: Britain’s credit card problem

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According to the latest YouGov research commissioned by credit information provider Equifax, 15 per cent of UK Adults have missed a payment on their credit cards at some point. Furthermore, over half (52 per cent) of those who don’t pay back their credit card bill, admit to not being able to afford to pay off the monthly balance that they owe on the card. Following the news from the Bank of England that UK borrowers tend to remain indebted for longer than previously thought, this latest study offers further insight into consumer borrowing behaviour.

The study by the Bank of England with the Financial Conduct Authority, released earlier this month, showed that 89 per cent of the total outstanding consumer debt in November 2016 was held by people who also owed debt two years earlier. Although a consumer might clear their debt on one credit card, this may not see them clear all their debt, as balances may be transferred, or new loans taken out.

The YouGov research commissioned by Equifax shows that for those individuals who have access to a credit card, nearly a third (32 per cent) have just one card, with one in five (20 per cent) having two cards. In addition, 13 per cent have gone over their overdraft limit at some point without approval from the lender, suggesting that they could be at risk of slipping into unmanageable debt if their financial circumstances change.

Whilst over half (52 per cent) the UK population who have a credit card and do not pay off their debt each month because they can’t afford to, the regional picture in some areas is worse. In the North of England and London people appear to be struggling the most with their debts, as 58 per cent say they can’t afford to pay off their monthly credit card balance in full each month. This is followed by 53 per cent of individuals in Scotland and 54 per cent in the South of England.

Overall, 15 per cent of respondents have missed credit card repayments, and this falls to 12 per cent in the Midlands and 14 per cent in the North. In contrast, people in London and Wales most likely to miss a payment (19 per cent).

“It’s clear to see that many people are taking on a lot of credit, which could leave them vulnerable to mounting debt, especially if their situation changes or the economic landscape shifts,” explains Lisa Hardstaff, credit information expert at Equifax. “It is not uncommon for UK households who face uncertainty over their finances to look to credit to help them get by. Our latest study shows that 40 per cent of individuals use their credit cards for day-to-day spending, which fits this picture. In addition, 22 per cent use their credit cards to make larger purchases that they can pay off over time.

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