According to the Bank of England, consumer credit card borrowing is at an all-time high. Unsecured credit to households in the UK increased by £1.2 billion in November 2021, a significant increase on the positive change seen earlier in the year.
It’s also a much bigger gain from the £800m economists were anticipating after the lockdown was eased.
How Credit Card Debt Has Changed
UK credit card debt was £56.5bn in August 2021. This was a significant reduction from 2020 figures of £72.1bn. But by the end of the year, Britons were spending far more and racking up more credit card debt. It was partly a reaction to the easing of restrictions, finally allowing people to get out and travel.
While the end of the lockdown has proven to be a relief for many, it has also increased the indebtedness of many households. According to Akansha Nath, Head of Partnerships at Credit Karma, “After such a tough year financially, encouraging buyers to only spend what they can afford is easier said than done. occasional treat can act as a brief distraction, challenges resulting from overspending are likely to last much longer.
A good credit score can save you a lot of money
Search by credit karma shows that paying off debt and improving your credit score can save you £129,000 over your lifetime. This is because people with poor credit are more likely to be charged higher interest rates, denied more affordable loans, or simply not be able to qualify for better financial opportunities. .
“Tackling debt or money issues as early as possible can limit their long-term impact,” says Nath. “Talking to your lenders or seeking independent support can help restructure debt in a more manageable way.”
This can then lessen the future impact on your ability to borrow money down the line. This includes lower rates for mortgages, credit cards, loans and car financing.
Strengthening your credit score
If you have a lot of credit card debt and can’t make minimum payments, that alone could destroy your credit score.
Having sources of credit in your name — whether it’s a cell phone bill or a credit card — can be a good thing, but only if you consistently pay those bills on time. Missing or late payments can impact your credit score, even if you’re only late once or for a few days.
Credit Karma also adds that you should be on the voter rolls if you aren’t already, as it helps your credit score. Also, you should check your credit report regularly. If you notice any irregularities or errors, reporting them and having them corrected can improve your credit report.
If your credit card debt is spiraling out of control and you can’t make payments, consider asking for help. Charities like StepChange can advise you on how to manage your debt and prioritize bills. They can also help you understand your finances so you can make better financial choices for the future.
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