Credit card borrowing grows by 4.7%

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credit cards

Credit card borrowing is growing more strongly than at any other time in the last five years as the economy picks up, the British Bankers' Association (BBA) has reported.

Annual growth in borrowing has reached 4.7%, with the increase strengthening to levels not seen since 2009, the BBA said.

The strong battle recently seen between credit card providers to offer long-running interest-free periods also means that nearly two-fifths (40%) of the total borrowing is not incurring interest, according to the findings.

Throughout 2013 there were 2.3 billion card purchases, marking a 5% increase on 2012, the BBA said. The total value of these purchases was £139.5 billion, which is 3% higher than a year earlier.
BBA statistics director David Dooks said: " These figures show credit card borrowing is now growing more strongly than at any time in the last five years.

"Greater housing activity and impressive jobs numbers are starting to feed consumer confidence, with customers more optimistic about their ability to pay back money they borrow. This all provides further evidence of the economic recovery."

Rachel Springall, spokeswoman for financial information website Moneyfacts, said: "There is definitely a case of optimism when in comes to borrowing in the current market, interest free deals are rife and providers are continuously fighting to be the best buy deal to attract customers.

"Those who are sitting in their overdrafts can also use a credit card to make a money transfer, where in some cases, can be a cost effective way of getting back into the black."

The findings were released as separate official figures showed that the number of people being tipped into insolvency fell to its lowest level in eight years in 2013, with the total number dropping to 101,049 across England and Wales.

While experts welcomed the Insolvency Service figures, they also warned that the new mood of rising consumer confidence amid some better news for the economy could tempt some people towards over-stretching their finances again.

Barclaycard has just announced a 31-month 0% balance transfer offer on its credit cards, hot on the heels of Halifax announcing a 30-month balance transfer deal.

Kevin Mountford, head of banking at MoneySuperMarket said: " Barclaycard has shown they really mean business by launching the longest ever balance transfer deal offering a staggering 31 months at 0%.

"The fact that Barclaycard responded so quickly shows how serious they are at being top dog in the balance transfer market. It's a spectacular deal for anyone looking to transfer their credit card balance."

Mr Mountford continued: "It will be interesting to see what happens now in the balance transfer market and how other providers think they can compete. "However, if you have a balance to transfer, consider how long you really need to pay off your debt.

"If you can afford to pay off your balance in a shorter timescale, some of the cards that offer shorter interest-free periods have much lower balance transfer fees so could be a better option."

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