Soaring number of Britons using credit cards for day-to-day spending
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Your support makes all the difference.Britain is becoming a nation of debtors, with increasing numbers of people being forced into "stressed borrowing" on credit cards to pay for essentials, new figures suggest.
The amount of cash borrowed through cards or loans climbed £629m in September, about a third more than the previous month's increase of £478m, the borrowing figures released from the Bank of England yesterday show. In July the figure stood at just £369m.
Secured lending, mainly in the form of mortgages, rose about £300m over the month while the total amount of individual debt across the country rose to almost £1.5 trillion. But the increase in the amount borrowed on cards and loans is more than double the extra mortgage lending, prompting warnings that a growing number of people are relying on plastic to pay their bills.
Howard Archer, the chief economist at Global Insight, said: "More people are having to borrow to help finance their spending as a consequence of the extended squeeze on their purchasing power coming from elevated inflation, low wage growth and tighter fiscal policy. In addition, job losses are rising."
The amount owed on credit cards climbed £200m in September to £56.9bn, while other loans and advances rose £500m to £151.8bn.
Research by the homelessness charity Shelter and Co-operative Insurance showed that nearly a third of struggling families are being forced to spend more money each month than they have coming in, with the average adult facing a monthly shortfall of £165. Further figures released yesterday by the Office of National Statistics revealed that struggling families are also hardest hit by rises in VAT. The data showed that the poorest one fifth of households pay more in VAT as a percentage of their disposable income than the richest fifth.
David Breger, of accountant HW Fisher, said: "This research reinforces what is widely perceived to be the fundamental inequality at the heart of VAT: the poor pay more of it relative to their incomes than the wealthy. In a strong economy VAT is arguably less of an issue, but at the current time – in a desperately weak economy – its effect on households' incomes is being significantly magnified." The figures come as debt charities warn that the number of people in financial difficulties is set to soar. Financial Inclusion Centre research for the Consumer Credit Counselling Service calculated that 3.2 million people were already in financial difficulty and a further three million were getting dangerously close.
Andrew Hagger, a money analyst at Moneynet.co.uk said: "Pressure on family finances has been relentless. Some will be borrowing more just to keep their heads above water."
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