Credit card spending and record levels of consumer debt have blighted UK consumers for many years, with the importance of credit groups steadily increasing in everyday life. In periods where lavish spending is expected - for instance, at Christmas and during the summer holiday season - credit spending can be a particularly large problem. However, in January 2007, new research revealed that while Britain's level of credit card spending is increasing, the rate at which consumers are paying off their debt is also rising.
According to Morgan Stanley, credit card spending has risen to an average of £1228 per person in the UK - almost £500 more than in the first three months last year. However, repayments were also up to their highest level since 1998, at 95.3 per cent. According to Patrick Muir of Morgan Stanley: “It is encouraging to see that people are using their credit cards sensibly, with credit card spending and repayment figures increasing in tandem. "
Mr Muir added: “Cardholders are becoming increasingly clever when it comes to being rewarded for the purchases they make and with a wide variety of reward schemes available, ranging from collecting points to cash back, spending on credit cards is fast becoming the most appealing way to pay when compared to other methods. "
The study by Morgan Stanley infers that, while the popularity of credit cards is higher than ever, the increasing offers provided by banks and financial institutions on interest free credit cards and low-rate credit cards means that consumer debt itself is not increasing.
What's more, the research suggests that credit card spending in the first three months of 2007 is set to be a staggering 68 per cent higher than it was in the first three months of 2006. Morgan Stanley also found that this increase in spending is most likely to be spent on the home and car, and then groceries, at figures of £377 and £341 respectively.
The importance of consumer debt levels today is gaining pertinence, as Britain's levels of consumer lending and consumer debt still remain among the highest in Europe. Currently, more and more people are looking for ways to increase their spending power - whether that's from choosing new credit cards or taking out personal loans . As a result, the conclusions made from Morgan Stanley's research findings show that, while credit spending itself is rising, the fact that repayments are increasing means that consumers are doing all they can to reduce their levels of debt where possible - a fact that consumer credit groups are sure to welcome wholeheartedly.
Andrew Regan is an online, freelance journalist.