UK Consumers Shun Credit Card Deals

New research by the British Bankers Association (BBA) has revealed that UK consumers are shunning lucrative credit card deals, opting to curb their spending and reduce personal debt.

Despite many credit cards in the UK offering cheap instant credit, data from the BBA reveals that borrowing on credit cards fell for the eighth time in nine months, despite the lure of the January sales last month.

David Brooks, BBA director of statistics, said: "Prudent repayments, particularly on credit card accounts, are keeping the unsecured credit picture very subdued."

UK consumers borrowed £500m less on their credit cards in January despite a rise in spending in 2006.

It appears that many UK consumers are addressing their debt problems as more Britons adopt a more responsible attitude to unsecured debt.

Howard Archer, chief UK economist at the Global Insight consultancy, said: "This is clearly a consequence of consumers striving to curb their use of credit cards, or finding less expensive ways of financing their spending by switching more to secured borrowing.

"With debt levels rising and many people stretching themselves to the limit in buying a house, there is clearly an increasing need for many consumers to do all they can to improve their finances. This need will have been heightened by the Bank of England raising interest rates for a third time in six months in January, and the strong likelihood that rates could go higher still."

The increased responsibility being shown by many UK credit card holders has seen an increase in demand for credit cards that offer low rates of interest for the lifetime of the balance. These cards allow consumers to pay off their card debt without accruing as much interest as they would if their debt was on a card charging a typical APR.

Alisdair Milton
1st March 2007

More Information:

• Choosing the Right Card
  There are literally hundreds of credit cards on offer in the UK, and the list is growing daily. So, which is the best on offer? It very much depends on how each person plans to use their card. The answer lies in asking one simple question; “What do I want to use a credit card for?”
• Quick Balance Transfer Guide
  Balance transfers allow card holders to transfer the money they owe to their existing credit card to another, usually at a special rate of interest. The new credit card company pays off the old credit card debt and transfers it to the new card. This article will tell you how to play the game.
• The True Cost of Balance Transfers
  Balance transfers are a great way to consolidate credit card debts into one place, especially when there are many 0% deals available. However, there are hidden costs.

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