Credit card debt has hit a record high, a report from Datamonitor reveals.
The report shows that average credit card balances outstanding per adult in the UK rose by 59%, from £719 in 1999 to £1,140 in 2003.
Datamonitor argues that any sudden increases in the base rate of interest will put pressure on mortgage repayments and may have a knock-on effect on the ability of some consumers to repay their credit card balances.
Credit card balances in the UK amounted to £53.5bn at the end of 2003, up from £33.1bn at the end of 1999, representing an increase of almost 62%. Over the same period, total number of cards on issue rose by 58%, from 41.5 million to almost 65.5 million. Datamonitor says the strong growth in card numbers suggests that UK consumers are becoming more and more comfortable with their use.
Despite fears that the market is nearing its saturation point, Datamonitor forecasts that credit card numbers and the total value of annual transactions will continue to grow. By 2008 it predicts there will be almost 91 million credit cards in circulation, an increase of 39% on 2003, and total transaction value will soar by over 42% to £157bn.
Kieran Hines, financial analyst at Datamonitor and author of the report, says: “This growth in credit card debt will only be of concern if consumers become unable to pay it back. The competitiveness of the credit card market will continue to provide consumers with low rate balance transfer options and competitive standard rates, and this will allow the financially aware to keep their interest payments low.”