Shoppers are returning to spending on credit cards as the economy improves – sparking fears of a return to unmanageable debts.
The amount spent on credit cards increased by 4.4 per cent in January to £13.9 billion compared to the same period last year, according to new data from the UK Cards Association, which represents the card payments industry in the UK.
UK consumers spent £0.9bn more on both their debit and credit cards in January compared to December last year, with overall spending rising from £45.6bn to £46.5bn. Over the past year, spending on cards has grown by 6.8 per cent.
The report found that spending on both credit and debit cards shot up as people took advantage of post-Christmas sales, while more shoppers than before turned to the internet to spend their cash.
Richard Koch, head of policy at the UK Cards Association, said: “This is another indicator of the continuing trend of rising consumer confidence based on an improving economic backdrop.
“There was a high amount of post-Christmas spending, with promotions on offer in the January sales, particularly at high street department stores, coupled with the continued strength in online spending.”
Pre-recession, credit card spending was rising rapidly, as people took advantage of easy borrowing to fund luxury purchases.
However, credit organisations have reined in lending in recent years, forcing people to turn to alternative borrowing methods, such as payday lenders.
Fraser Sutherland, policy officer at Citizens Advice Scotland, said: “Debt cases represent a third of all the work of the Scottish Citizens Advice Bureaux service and last year we helped Scots with over 36,000 issues on credit card debts alone.
“For a time, it seemed that payday loans had become some consumers’ only choice for credit, but these figures show that people are still getting and using credit cards as well.
“Both these types of debt are potentially dangerous, though, and our general advice to people on any form of debt is to always read the small print, only borrow what you know you can repay, and shop around for the cheapest lender – for example a credit union.”
The report, Card Expenditure Statistics for January 2014, showed retail sector spending increased by £0.6bn to £22bn.
The majority of this was sales in high street department stores, which were up £0.3bn and by ten million transactions.
Spending on vehicles also rose, by £0.3bn to £3.1bn.