Consumers Face Rising Credit Reliance Despite Lower Interest Rates

“The latest UK Finance card spending report for August 2024 reflects a continued reliance on credit for household finances. The rate of inflation may have slowed, but consumers are still finding themselves struggling with the prevailing cost of living. Most notably, consumers significantly increased their reliance on credit card debt despite a relatively low level of growth in total spend. Specifically, overall credit card spend grew by just 1.9%, below the rate of household inflation, but outstanding balances on credit cards grew by 7.4% over that same period, well in excess of inflation. Despite the recent decreases in the Bank of England’s interest rates, and the lower rate of inflation, this increase to underlying indebtedness suggests that consumers are still feeling the pressure of financial strain.

“TransUnion’s Q3 2024 Consumer Pulse survey revealed that 85% of consumers rank inflation as one of their top three concerns over the next three months. Many are continuing to feel the impacts of high borrowing costs, and this growing dependency on credit points to a need for support to promote financial resilience among UK households.

“As consumers continue to face uncertainty, responsible lending and data-driven decision-making are more essential than ever. Financial institutions must use up-to-date consumer insights to better understand borrowers’ financial health, supporting sustainable financial wellbeing amid ongoing economic challenges.”