Credit card debt soared by £1.5 billion in February as the cost of living spiked across the UK, along with an additional £400 million in alternative borrowing, including personal loans and store cards.
The figures look grim for households as “awful April” looks set to eat into money which families can no longer afford to spare.
The £1.5 billion rise in credit card debt was noted as equal to the past five months of debt combined, and a dramatic change from the strongest period for pandemic savings which saw UK customers pay off almost £5 billion of credit card debt in just one month.
Consumers also only put aside an estimated £4 billion in savings compared to £7.2 billion in February.
The debt figure is looking set to climb as the cost of living increases over the coming months, bringing bad news for households already squeezed beyond their margins off the back of the Covid-19 pandemic, which has pummelled the economy for two years.
Chancellor Rishi Sunak announced a selection of small measures in his Spring Statement in a bid to help ease the pressure from households. However, his offerings of a £1 billion fund to assist vulnerable households with rising costs and his National Insurance threshold rise to £12,570 a year is unlikely to do a great deal to curb the bite of skyrocketing energy and consumer goods costs.
“The nation is clearly already feeling the effects of the cost of living crunch, with credit card use soaring in February as rising prices push more people into debt,” said AJ Bell head of personal finance Laura Suter.
“It’s worth noting that the Bank of England figures also don’t include any of the Buy Now Pay Later market, which has boomed in recent years and accounts for a big chunk of the credit we all take on.”
“This means that the nation’s debt figure will be much higher in reality, as people choose to defer paying for stuff they can’t afford today.”
“More households are going to have no spare money to put away each month and will have to start eating through their savings as ‘awful April’ hits and the squeeze on all our incomes ramps up.”