FAMILIES’ credit card debt is set to soar at two-and-a-half times the rate of wages, as families desperately take out credit to avoid starvation and eviction.
The TUC yesterday criticised Tory Chancellor George Osborne for expecting families to ‘bail out his faltering recovery on their credit cards’, adding that such a rapid rise of credit card debt is feeding a ‘debt-fuelled bubble’.
The Office for Budgetary Responsibility (OBR), which Osborne actually set up, is predicting that families debt is set to rise to 171 per cent of their ‘disposable income’ by 2019. At its very peak, just before the financial crash of 2007-8, families’ credit card debt reached 168 per cent of their disposable income. Debt is now set to increase at two and a half times the rate of wages, and unsecured debt will average £25,000 by 2019.
Frances O’Grady, general secretary of the TUC, said: ‘In a healthy economy, workers’ wages grow faster than their debts. But pay rises are still well below their pre-recession trend, and current gains are only because of global factors causing exceptionally low inflation.
‘Osborne’s plan to cut tax credits will only put more pressure on working families to borrow to get by. What we really need is a wages-led recovery, not a debt-fuelled bubble.’
Meanwhile, The Money Charity published figures yesterday showing that that the total outstanding credit card debt is now at £61.2 billion, an average of £2,292 for every household. The Money Charity said: ‘Every day, almost £8m is spent on credit cards or £5,429 a second. Many consumers benefit from lengthy interest-free deals, but when those expire the rate jumps to an average 17.85% APR.’
Campbell Robb, chief executive of Shelter, said: ‘Using credit cards to pay the rent or mortgage is simply robbing Peter to pay Paul. With the average credit card interest rate now standing at over 16% it is the worst possible course of action.’