Credit cards usage slipping since 2005
Attitudes towards debt on credit cards began to change long before the financial crisis, according to The UK Cards Association.
In a new report, the trade body tracks the shift in spending and borrowing on plastic from 2000 through 2010, labelling the period “a decade of two halves”.
From 2000 to 2005, banks and other lenders recorded strong growth across all forms of card use in the UK, followed by a “sharp retrenchment” thereafter in the use of credit cards.
During the period, 22.8 million new credit cards were issued, increasing the number of cards in circulation to 70 million, and the amount of debt outstanding on credit cards almost doubled to £68 billion.
However, five years later, at the end of 2010, the number of credit cards in circulation had fallen to 55.6 million and outstanding balances were down £10 billion, to £58 billion.
The sharpest retrenchment took place in 2009, when almost one in eight (7.8 million) credit cards were removed from wallets and purses.
In 2010, 62% of cardholders were paying off their balances in full each month, compared to 55% in 2005, with the over-45 age group accounting for much of the change.
Meanwhile, spending on debit cards almost doubled between 2005 and 2010, but with growth fuelled by a migration from cash to debit cards for smaller value transactions.
Commenting on the data, UK Cards Association chair, Melanie Johnson, says: “The UK’s passion for the convenience of plastic is alive and well, though the debit card has stolen a march on the credit card.”
She adds: “From similar levels of usage in 2000, debit cards are now used three times as often as credit cards”.
The decade also saw changes in credit card providers’ practices, notably providers being forced to revise their order of payments, so that monthly repayments are used to pay off the most expensive debt first.
Then in early 2011, consumers gained the right to reject unsolicited increases in credit limits, and credit card cheques became available by request, rather than turning up unexpectedly in the post.