Warning on the UK's colossal credit binge (2024)

Families are bingeing on debt at the fastest pace in 11 years.

More than £190billion is now owed on credit cards, loans and overdrafts – 11 per cent more than only a year ago.

The increase is the biggest since October 2005 – two years before the run on Northern Rock and the start of the global financial crisis.

The average debt per household – excluding mortgages – stands at £7,300. Visa said £2billion went on its cards on Black Friday alone.

More than £572million was added to outstanding credit card bills last month, according to Bank of England figures released today.

Campaigners warned that borrowers faced being buried under debts they could not pay off.

‘My worry is we are repeating the mistakes of the past,’ said Baroness Altmann, a consumer champion andformer pensions minister.

‘Excessive borrowing caused the financial crisis, which caused years of misery. Nothing has been done to address the problem of household debt – and it is rising again.

‘Banks and other financial institutions have been very good at luring customers into borrowing more by offering teaser rates.

‘I fear many households will be unable to meet their repayments when they finally rise, and they have less money left over each month after paying off their mortgage.’

The £572million added to credit card bills pushed the total to £66.2billion – a record high. Other lending – such as personal loans, overdrafts and car finance – rose by £1billion to £123.9billion as families took advantage of record low interest rates.

Gillian Guy of Citizens Advice said: ‘As consumer credit growth hits an 11-year high people could be at risk of getting trapped in a debt bubble. Regulators need to see that rules are in place which allow people fair access to affordable credit while ensuring adequate checks are carried out to make sure they can afford to borrow.’

Credit card holders can rack up debt at low cost for an introductory period but are then hit with sky-high rates. The average has risen to 23 per cent, according to Moneyfacts.

And research for the Mail has revealed that retail chains are levying rates of almost 30 per cent on their credit cards. Those owned by Topshop tycoon Sir Philip Green are among the worst.

Peter Tutton, of the StepChange debt charity, said: ‘Consumer credit is rising at its fastest rate for over a decade and the amount owed on credit cards continues to hit record levels. With Christmas on the horizon, there is a real risk of adding to the millions of people already struggling with high levels of persistent debt.’ Halifax, Virgin Money and MBNA all offer cards where no interest is paid on debts transferred for 41 months, following a hefty initial charge of more than 3 per cent.

Once this period elapses Halifax and MBNA crank up their interest rate to 18.9 per cent. Virgin charges 20.9 per cent.

The Financial Conduct Authority has launched a fresh investigation into rip-off rates. The move could lead to the introduction of price caps similar to those imposed on payday lenders in January last year.

The sweeping review will look at any loans which impose hefty rates or fees, including pawnbroking firms and logbook loans, where borrowers have to use their cars as security. The probe will also investigate credit cards charging up to 50 per cent and overdraft fees.

In a blog for moneysavingexpert.com, FCA chief executive Andrew Bailey said the idea was to ‘assess whether we need to take any additional action to ensure people are protected and not being ripped off’.