A new report from the Bank of England and the Financial Conduct Authority (FCA) has revealed that 89 per cent of credit card debt was held by consumers who were also in debt two years before.
According to the study, it had become common for people to remain in debt even after paying off a credit card, as they often shifted remaining debts from one lender to another every year.
Data from the bank also shows that personal debts have risen to the highest level since before the credit crunch, reaching more than £200bn – with credit cards accounting for more than £70 billion of current UK consumer debt.
The FCA and Bank warned in their report that with wages falling in real terms for many people in 2018 there was a risk that more would be pushed further into debt should they wish to maintain their living standards.
Worried about the growth of personal debt in recent months, Threadneedle Street has been requiring banks to strengthen their financial reserves to protect against any losses. It has warned that Britain’s banks could incur £30 billion of losses if interest rates and unemployment rose sharply.
One emerging trend is also the growth of debt amongst those with good credit scores, which suggests lending to people with poor credit scores is no longer increasing.
