Credit Cards More Popular Than Ever

New figures released by the Bank of England show that purchases on credit cards have risen in the first quarter of 2008.

Compared with the same time period in 2007, card purchases rose by 8.9 per cent. Both the number of purchases made on credit cards and the amount spent rose compared to last year.

In the first quarter of 2008, a total of 1.8 billion purchases were made on plastic cards in the United Kingdom, totalling £91.1 billion. The majority of those purchases were made on debit cards, which represented 72.8 per cent of all card purchases.

The use of debit cards rather than credit cards was up from the 71.1 per cent of purchases on plastic that debit cards accounted for in the first quarter of 2007.

This is perhaps a reflection of the impact the credit crunch is having on spending, with more people opting for the safer option of using a debit card rather than a credit card.

However, despite widespread reports that spending is down and credit is harder to come by, spending has increased on credit cards also.

With high street shops reporting poor sales, it is a likely conclusion that more people are using their credit cards to cover more mundane costs such as household bills and groceries as they are finding these costs harder to meet without resorting to credit.

In the first quarter of 2008 credit card lending totalled £32.1 billion, with the majority of that lent in January. Over the same period, £32.1 billion of repayments were made as well.

Since last year, credit card lending has increased with outstanding credit card balances £1 billion more than last year.

Credit has become much harder to get hold of, indeed for those with poor credit card rating many doors will be closed, credit limits have been cut and rising costs are making people cut back on luxuries.

However, credit card spending has still increased greatly since last year. For many the tightening up on lending is not a barrier, the majority of the population have good credit ratings.

Others are simply finding that to find the credit card they want they simply have to shop around more and perhaps settle for higher rates than they might have liked.

Many are using old credit cards which are saved for emergencies seeing times such as these when many cannot reach basic costs as an emergency.

Those who have had their limits cut often still have plenty of spending room on their credit card before they reach their limit anyway. Fearing that their limit will be cut again, many are taking advantage of the limit they have on their credit card while it is still there.

While rising costs are making people cut back on luxuries, necessities have risen in price. As a consequence credit cards are being used increasingly often to pay for necessities.

As a result of all these points, credit card spending has increased greatly since last year despite the credit crunch and the tightening of everyone’s pockets.

Carys is an author of several articles pertaining to Credit Cards. He is known for his expertise on the subject and on other Business and Finance related articles.