Adult consumers in the UK possess an average unsecured debt of £8,800 and have collectively run up a credit card debt of almost £5.5 billion, according to new figures from financial charity CreditAction.
The charity, which aims to educate consumers on the dangers of credit, reports that three quarters of all credit cardholders regularly fail to clear their account and subsequently face interest rates of as much as 20 per cent.
The immense level of debt is caused in large part by the many different providers that offer customers the choice of hundreds of different credit card deals, but consumers are also responsible for spending beyond their immediate means.
British consumers have the largest personal debt of any country in Europe, collectively owing an immense £1.3 trillion. Official data suggests that over 30,000 individuals claimed insolvency in the first quarter of 2019 and it is expected by some market analysts that as many as 130,000 individuals will be forced to do the same by the year’s end.
Consumers remain confident
Despite the record levels of debt, Julia Dallimore, marketing director at loan provider Picture Financial, believes that most consumers are happy with their credit and borrowing situation.
Commenting during Credit Awareness Week (May 14th-20th), which aimed to promote greater understanding of credit issues among the general public, Ms Dallimore said: “Contrary to many of the reports out there the vast majority of us are comfortable with our levels of credit and borrowing and use it as an acceptable means to maintain our standard of living”.
She also asserted that the key to avoiding financial hardship is to understand the terms of any financial agreements, but warned that it was becoming “increasingly apparent” that people are having difficulties with this.
“To ensure people are better informed about their finances, it is vital that consumers are completely clear about what they are trying to achieve when taking on extra borrowing, whether it is to pay off their existing credit in a shorter timeframe or reducing their monthly repayments for greater financial freedom.”
A recent survey conducted by CreditExpert.co.uk, the online credit monitoring service from Experian and sponsor of Credit Awareness Week, found that six million British consumers would only be concerned by their debts if they exceeded £15,000.
Remarkably, 1.4 million people, five per cent of the adult population, claimed that they would not worry about debts until they passed £50,000.
The report also found that consumer confidence reached an annual high during April. In fact, 41 per cent of people with credit or loans claimed they were “very comfortable” with their current financial situation.
Jim Hodgkins, managing director of CreditExpert.co.uk, noted: “The fact that so many Brits are happy with unsecured borrowing of at least £15,000 may seem shocking on first sight, but the ‘credit comfy’ generation seems to have become anaesthetized to the real implications of mounting debt.
“With the current rise in interest rates, many will find that debt they blithely ignored is in danger of spiralling out of control,” he warned consumers.