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Britain's credit card debt pile falls year-on-year for the first time

por Lamont Hogan (2020-05-20)


(<strong>2908<\/strong>99472539!)2553 (@sontal00)Households paid back a whopping £3.8billion more debt than they borrowed in March 2020, the biggest figure on record, as households shunned credit cards in the face of the coronavirus crisis.

Britain's credit card debt pile shrank £2.4billion in a month to £69.3billion, only the second time since July 2013 the amount Britons have outstanding on plastic has fallen, according to the Bank of England figures.

The amount of debt held on credit cards was lower than the same month the year before for the first time since it began recording the data in 2008, it adds.






Plastic purge: Britons shunned their credit cards in the face of the coronavirus outbreak 


Households paid back £1.5billion more in other loans and advances than they borrowed in March.

These latest findings meant Britain's total unsecured debt pile sat at £220.9billion, down 1.7 per cent on February.






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'This very weak net lending', the Bank of England's money and credit report said, 'reflected a larger fall in new borrowing that was partially offset by slightly lower repayments. 

Gross lending was £5.4billion weaker than February, while repayments were £1.3billion lower.'

While Britons weren't fully clearing their credit cards in the face of the economic crisis caused by the coronavirus, the fact a lot less was borrowed means some will still end up with smaller balances.






Households repaid £3.8bn more than they borrowed on credit cards and loans last month, the biggest reduction in Britain's unsecured debt pile since records began in 2008


Andrew Hagger, the founder of personal finance site Moneycomms, said: 'The cut back in spending is astonishing but a combination of people being extra careful with their money and unable to spend on big ticket items such as cars and holidays has seen borrowing levels slump.'

He said this was an 'alarming reality for retailers' and that April figures were likely to be even worse, something echoed by another industry expert.

Figures released by Barclaycard, which processes around half of the UK's spending, found consumer spending fell 6 per cent year-on-year in March and non-essential spending fell almost 13 per cent.





The slump in borrowing may also reflect lenders tightening their criteria. 

A survey a fortnight ago from the Bank of England found lenders expect the availability of unsecured credit to decrease over the next three months, while the generosity and number of interest-free deals also began to decrease in March.

Financial information site Moneyfacts last week found the number of interest-free balance transfer deals available had dropped to 70, the lowest level in three years and down from 125 in January 2017. 

There are now just 61, and 58 interest-free purchase credit cards, the fewest since at least 2006.

Banks are also pulling products from sale in a bid to attract fewer applications and focus on existing customers, many of whom are likely to be requesting three-month payment holidays on their credit cards and personal loans.

Figures this week from some of the UK's biggest banks found 15,000 credit card and 18,600 personal loan customers of Santander had been granted payment holidays, while Britain's biggest bank Lloyds said 219,000 credit card customers and 174,000 loan borrowers had been granted holidays. 





Moneyfacts' Rachel Springall said: 'I feel there is going to be a division of household wealth at the moment and indeed over the coming weeks. 

'On one end of the scale you will have those who may have unsecured debt, and are looking to refinance but have had their circumstances change in light of the Coronavirus so they can't or don't feel it is the right time to do so.

'On the other hand you may have households who are working from home, finding their disposable income is greater and have time to look at new finance options. 

This could give rise to people remortgaging, changing their cards, taking out a loan to consolidate debts, or indeed have disposable income to save.'

Andrew previously told This is Money 'The appetite from lenders to take on fresh unsecured debt will wane as unemployment soars and the economy weakens. 

'Restricting new 0 per cent lending by tightening lending criteria and/or reducing the competitiveness of products wouldn't surprise me.'






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