Unsecured credit all-time high as Brits go on credit card spending binge

Unsecured credit, including credit card debt, grew by over £1 billion in November 2021, impacting cardholders’ credit scores. What can they do about it?

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

A selection of Virgin Money credit cards

Image source: Virgin Money.

Consumer borrowing on credit cards has jumped to an all-time high, according to the Bank of England. Household unsecured credit in the UK grew by £1.2 billion in November 2021, a significant increase from the positive change seen earlier in the year.

It’s also a much higher gain compared to the £800 million economists were anticipating after the easing of the lockdown.

Inflation Is Coming

Inflation is out of control, and people are running scared. But right now there’s one thing we believe Investors should avoid doing at all costs… and that’s doing nothing. That’s why we’ve put together a special report that uncovers 3 of our top UK and US share ideas to try and best hedge against inflation… and better still, we’re giving it away completely FREE today!

Click here to claim your copy now!

How credit card debt has changed

Credit card debt across the UK was £56.5 billion in August 2021. This was a significant reduction from 2020’s numbers, which reached £72.1 billion. But by the end of the year, Brits were spending a lot more and accruing more credit card debt. This was partly a reaction to the easing of the restrictions, allowing people to finally go out and travel.

While the end of lockdown has proven to be a relief for many, it has also increased debt for many households. According to Akansha Nath, head of partnerships at Credit Karma, “After such a financially difficult year, encouraging shoppers to only spend what they can afford is easier said than done. But while the occasional treat can act as a brief distraction, the resulting challenges of overspending are likely to last much longer.”

A good credit score can save you a lot of money

Research by Credit Karma shows that paying off debt and improving your credit score can save you an astonishing £129,000 over a lifetime. This is because people with poor credit are more likely to be charged higher interest rates, denied more affordable loans, or simply not able to qualify for better financial opportunities. 

“Tackling debt or money worries as early as possible can limit their long term impact,” says Nath. “Talking to your lenders, or seeking independent support can help to restructure debt in a more manageable way.”

This can then reduce the future impact on your ability to borrow money down the line. This includes lower rates for mortgages, credit cards, loans and car finance.

Strengthening your credit score

If you have a lot of credit card debt and cannot keep up with the minimum payments, this alone could be destroying your credit score.

Having sources of credit in your name – whether that’s a mobile phone bill or a credit card – can be a good thing, but only if you regularly pay those bills on time. Missing or late payments can impact your credit score even you’re only late once or for a couple of days.

Credit Karma also adds you should be registered on the electoral roll if you aren’t already, as this helps your credit score. Plus, you should check your credit report regularly. If you notice irregularities or errors, reporting them and having them corrected can improve your credit report.

If your credit card debt is out of control and you are unable to make payments, consider seeking help. Charities like StepChange can advise you on how to deal with your debt and prioritise bills. They can also help you understand your finances so you can make better financial choices for the future. 

More on Personal Finance

Note paper with question mark on orange background
Personal Finance

Should you invest your ISA in a model portfolio?

Which model ISA portfolios offer both high performance and low fees? Hargreaves Lansdown, Interactive Investor and AJ Bell go under…

Read more »

Economic Uncertainty Ahead Sign With Stormy Background
Personal Finance

Is it time to exit emerging markets investments?

Investors may well be sitting on losses from emerging markets funds. Is it worth keeping the faith for a sustained…

Read more »

Personal Finance

Share trading? Three shares with turnaround potential

Share trading has been difficult in 2022, but which companies have turnaround potential? Jo Groves takes a closer look at…

Read more »

Man using credit card and smartphone for purchasing goods online.
Personal Finance

Revealed! Why Gen Z may be the savviest generation when it comes to credit cards

New research reveals that Gen Z may be the most astute when it comes to credit cards. But why? And…

Read more »

Environmental technology concept.
Personal Finance

The 10 best-performing sectors for ISA investors

The best-performing sectors over the past year invested in real assets such as infrastructure, but is this trend set to…

Read more »

Road sign warning of a risk ahead
Personal Finance

Recession risk ‘on the rise’: is it time for investors to worry?

A major global bank has suggested the risk of a recession in the UK is 'on the rise'. So, should…

Read more »

pensive bearded business man sitting on chair looking out of the window
Personal Finance

1 in 4 cutting back on investments amid cost of living crisis

New research shows one in four investors have cut back on their investing contributions to cope with the rising cost…

Read more »

Image of person checking their shares portfolio on mobile phone and computer
Personal Finance

The 10 most popular stocks among UK investors so far this year

As the new tax year kicks off, here's a look at some of the most popular stocks among UK investors…

Read more »