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unravelit Credit Cards report '05

In 2003, Xelector conducted an online consumer debt survey into credit card usage among UK consumers. Based on over 7,000 responses that survey added useful insights to the ongoing debate surrounding consumer debt.

Credit Cards report '05

In Q1 2005, Xelector conducted a similar survey to that of 2003. This survey, now based on responses from over 20,500 individuals, provides a valuable comparison to the consumer behaviour spanning the two years. The main findings and conclusions are presented below.

  1. 35% of all cardholders currently maintain a zero balance or owe less than £100 compared to 49% of cardholders in 2003.
  2. On average, UK cardholders currently owe £1,845 in outstanding balance. Balances are widely distributed. A relatively small core of debtors owes the bulk of debt - just one third of cardholders are responsible for 90% of credit card debt. This equates to a 47% increase in outstanding balances when compared to the figure for outstanding balance in 2003 (£1,255) when a quarter of cardholders were responsible for 90% of the debt.
  3. Consumers apply for additional credit cards to extend their debt ceiling. Consumers with two cards or more are likely to have a higher balance than consumers who use just one card. Customers with five credit cards or more are three times more likely to carry above-average balances than customers with just one card. This trend is mirrored in both 2003 and 2005.
  4. Over two thirds of consumers currently use credit cards from a lender with below average Annual Percentage Rate (APR). This compares with one quarter of customers in 2003.
  5. In 2005, customers on average repaid 81p for every £1 spent on their credit cards. This compares to 74p for every £1 spent in 2003 indicating that customers are decreasing their credit card debt at a greater rate than two years ago.
  6. Of the surveyed customers who hold at least one credit card, 26% have transferred their balance to another card within the last twelve months.

While the majority of UK consumers are using their cards without creating unmanageable levels of debt, a significant minority have run up balances, which might prove harder to control if interest rates increase. Consumers are advised to shift debts into lower cost loans products, with fixed interest rates and defined repayment schedules.

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