Credit card balances contract by 18.5% in 12 months to March

Outstanding balances on credit card accounts have contracted by 18.5% over the 12 months to March, as a result of repayments outstripping new borrowing in the year, new figures from UK Finance have revealed.

The banking body stated that March saw 256 million credit card transactions by UK cardholders in March, a figure 26.9% higher than in February, but 6.5% fewer than in March 2020.

The total spend on credit cards of £14.1bn during the month was 28.9% higher than in February, but reflected a fall of 2.2% from March 2020.

UK Finance’s figures also revealed there were 1.5 billion debit card transactions in March. This was a level 21.4% higher more than in February, and 2.9% more than in March 2020. The total spend on debit cards of £56.2bn was a figure 19.6% higher than in February, as well as 2.7% higher than March 2020, UK Finance added.

Commenting on the data, Hargreaves Lansdown personal finance analyst, Sarah Coles, said: “A year into the crisis, we’d made major inroads into paying off expensive credit card debts, but as the economy has started opening up again, our repayments are lower, and we’ve started spending more. There’s a risk that vital and exciting new freedoms in life more generally could threaten our newfound freedom from debt.

“The UK Finance figures show just how much progress we’d made in paying off expensive debt by March. We’d repaid a fifth of credit card balances, and cut the number of cards with amounts outstanding at the end of the month by 11%.

“It means we haven’t changed our approach to debt entirely. As soon as they have the opportunity, people will spend again, and many of them will borrow to do so. But before you slip back into old habits, it’s worth thinking carefully about your spending, and whether you can cut costs in some parts of your budget to free up cash to spend on the things you want to prioritise.”

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