Credit card spending soars to £700m in August as people essentially borrow | Credit card

Spending on credit cards jumped by £700million in August as households borrowed heavily to cope with the cost of living crisis.

The rise at a time of heightened anxiety over rising energy bills pushed the annual growth rate of spending on credit cards to 12.9%, its highest common level since 2005, the data shows. of the Bank of England.

Economists said the jump in credit card balances this year to £5.9billion showed the stress many households face as they struggle to make ends meet.

During periods of economic growth, high levels of credit spending are attributed to consumer confidence, but economists said high inflation and indications that the economy was heading into a recession meant it was more Households were likely using their cards to pay for food bills and other essentials.

Maintaining a high level of borrowing on credit was also becoming more costly after the average interest rate rose to 18.66% in August, above the 18.55% seen before the pandemic.

The annual growth rate of all consumer credit remained at 7.0% in August; the highest rate since March 2019 when it reached 7.2%.

Further sign of the strain on family budgets, households continued to deposit less money in their accounts than before 2020.

The combined net flow to bank and building society deposit accounts and NS&I accounts in August remained unchanged at £4.3bn, remaining below the average monthly flow of £5.5bn over the course of from the 12 months preceding the pandemic period until February 2020.

Laura Suter, head of personal finance at stockbroker AJ Bell, said: “Credit card borrowing remains at a 17-year high as more people turn to plastic for cover. rising costs.”

The addition of personal loans and car finance took the total level of consumer borrowing to £10.5bn this year.

“But that figure hides the true extent of the nation’s debt because it does not include ‘buy now, pay later’ borrowing and more informal lending between family and friends,” she said.

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