Millions struggle with card payments

UK shoppers are piling on the debt

With growing concerns over levels of consumer debt in the UK, new research has suggested more than two million Britons are already caught in a chronic credit trap.

According to research by Mintel, 2.3 million consumers not only find it difficult to pay off the interest on their account each month, but always have a balance outstanding.

The statistics reflect concerns that cheap credit is pushing people into borrowing way beyond their means.

The UK's main financial watchdog, the Financial Services Authority, estimates six million households are in some sort of financial difficulty.

Persistent debt

There are now more than 58m credit cards in issue, up from just over 28m in 1995, with some 1300 brands available - and consumers are piling big money on to their cards, Mintel said.

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More than three million cardholders owe in excess of £1,500, and of those two million owe more than £2,500.

People in their late twenties to early forties owe the most, with a fifth in the age group 25 to 44 having a balance of at least £1,500 on their credit cards, said Mintel.

In recent years there has been an explosion of cheap introductory rates to tempt borrowers, but some fear these could be encouraging people to overspend.

"People with credit cards are increasingly building up large balances, often taking advantage of interest-free periods on new cards available through switching provider," said Paul Davies, senior financial consultant at Mintel.

Credit card spending 1995: £48bn 2002: £117bn

"However, if interest rates rise consumers may find that they have trouble paying off existing debt and face higher monthly repayments to credit card companies."

Concerns about rising consumer debt have also been fuelled by recent statistics which showed personal bankruptcies had increased by 14% during the three months to June 2003.

"Many people are still using credit cards despite not being able to pay off existing debt as they are often encouraged by rising credit limits offered by providers," said Mr Davies.