Use Of Credit Cards Accelerating

Use of credit and debit cards by UK consumers has accelerated and is growing at the fastest rate since 2008 according to industry group UK Finance. The number of transactions on card grew by 12% over the year to the end of June, with the value of spending also increasing by 7%. The figures have worried analysts at the Bank of England and while the reliance cards is in part attributed to the ongoing trend away from cash payments, this is not the whole picture.

Rising inflation and slow wage growth is giving rise to an increase in consumer borrowing as households continue to feel the squeeze. Indeed the rise in levels of borrowing has led the UK’s central bank to demand lenders increase their capital base in an attempt to protect the financial system. While consumers are spending, reports suggest that this is focused on essentials such food and fuel. The Office of National Statistics published its official inflation figures last week showing that apart from spending in supermarkets there were falls in every major sector. Commenting on the figures at the time Tej Parikh, Senior Economist at the Institute of Directors said ‘the squeeze on household incomes only compounds the weakening economic outlook for businesses this year.’ He went on to predict that ‘subdued wage growth is likely to weigh down consumer demand.’