Credit card debt has piled up with more consumers being hit with interest charges as the cost of living crisis wipes out lockdown-induced rainy day funds.
Almost £55 for every £100 held on credit cards is now incurring interest – a figure that rose each month in the three months to January, the latest data from banking trade body UK Finance showed.
Experts said struggling families were taking on debt to afford rising energy and food bills, with increased spending wiping out their lockdown savings. Helen Morrisey of brokers Hargreaves Lansdown said the pandemic savings boom was “unravelling”.
She added: “Subdued spending habits during the pandemic meant we were less likely to use plastic and not pay debts off in full.
“There was always going to be a financial hangover after Christmas but this is a sign the rising cost of living is starting to bite. We are burning our way through lockdown savings to meet everyday expenses and using credit cards to fill any gaps.”
Ms Morrisey warned the worst was yet to come given the latest UK Finance data did not cover recent weeks when inflation reached 7pc – the highest level since 1992 – or energy bills rising by 54pc on April 1.
Overall credit card use was up 3.8pc in the 12 months to January, as families increasingly relied on borrowing and reversed the downward trend seen during the pandemic, as the chart below shows.