UK credit card debt is at record highs as high inflation rates continue to soar.UK consumers are facing some of the highest inflation rates in decades and the nation is experiencing a cost of living crisis. As such, consumers are looking to credit cards and loans to cover their expenses. In February, UK consumers borrowed £1.5 billion (net) which, according to the Financial Times, is the highest monthly figure since records began in 1993. This figure was purportedly 3 times higher than the average amount borrowed in the previous 6 months (£400 million).
This all-time high for consumer borrowing is said to be in response to the cost of living crisis, with consumers looking to find ways to budget more effectively and even borrow money just to cover their essential monthly expenditure. However, some economists have suggested that the increased credit card borrowing may also be in response to a range of social factors such as the lifting of the coronavirus restrictions.
How much are people spending?
According to data from ONS (the Office for National Statistics), 12% of respondents suggested that they were using credit cards more than usual just to cover the increased prices of their everyday goods and services. For those aged 30 to 49, this figure was 18%. There was also an increase in the volume of people borrowing from friends and family.
Inflation rates in the coming months have been estimated to be as high as 8.3%, rendering many everyday items unaffordable for a lot of people. ONS data suggests that 81% of UK adults have experienced an increase in their cost of living across all aspects of their expenditure including food, gas, electricity and fuel. As a consequence, 22% of UK adults are using their savings just to cover their everyday goods.
Consumers are seemingly borrowing increasingly more money just to protect their current lifestyle from the impact of inflation.
Cost of living crisis
As the cost of living crisis continues, more and more people will be compelled to use credit in order to cover rising bills – this could create a severe national debt problem in the future, with some people needing to sell a property to stay afloat financially.
What is clear is that UK households, especially low-income households, are looking to expensive and unsustainable borrowing methods in order to compensate for the rising costs of fuel, food and clothing.
Many households have been looking for cheaper alternatives to make ends meet, opting for cheaper supermarkets, and low-nutritional, high-calorie alternatives just to feed themselves. For the low-income families spending more on credit cards, the concern will be how they will be able to afford to pay off their debt in the future.
