Average Credit Card Debt – Complete Analysis, Overview, FAQs & More

Credit cards are a great financial tool that can be very useful when used appropriately.

However, they can also enable destructive and unhinged spending habits which can land you in debt. 

According to a survey conducted by money.co.uk, more than half of UK consumers (approximately 27 million people) entered the year 2020 while being in debt.

About five million of these people had debts that were larger than £10,000. 

Looking at statistics related to the average credit card debt in the UK can help us get any idea into the spending patterns of the average Brit. 

Total Outstanding Credit Card Debt in the United Kingdom

At the start of 2020, the total outstanding was a whopping £72.1 billion. The silver lining is that it was down ever so slightly from 2019’s £72.4 billion. This is the first decline the nation has seen in credit card debt since 2013. 

Up to 2013, Brits were steadily decreasing their debts following the Great Recession but since 2013, personal debt has been on a steady increase until now. 

Average UK Credit Card Debt for Every Household 

Similarly to the total credit debt, the average debt for a UK household declined until 2013 and then steadily rose up to 2019.

At the start of 2020, the average UK debt per household was £2,592. This is a slight decrease from the start of 2019 where it was £2,601.

Average Credit Card Interest Rates in the UK

The interest rate on credit cards is usually a lot higher than other forms of loans and in recent years, there have been no signs of that changing. 

In 2020, the representative interest on credit cards is 20.65%. This represents a steep rise in the interest rates since 2018 during which they were 18.26%. 

This is a strong sign that you should be wary of carrying credit debt if you’re thinking of paying it back by submitting a minimum payment per month. 

Submitting the minimum amount of money required on a personal debt that has a high interest rate almost never works and causes you to be in what is called ‘persistent debt’. 

What persistent debt means is that the interest rate will make it impossible for you to pay off your debt completely if you keep paying the minimum amount of money required per month. 

You will have to increase the amount of money you pay every month if you want to get out of such a debt. 

Credit Card Debt Write-Offs in the UK 

A large reason as to why the average interest rate of credit cards is so high is due to the fact that banks and credit card companies tend to write off debts that they are unable to collect. 

They do not specialise in chasing debts so when they have trouble collecting a debt owed to them, there’s a chance that they write it off considering the circumstances. 

During the year of 2010 in the aftermath of the Great Recession, write-offs rose by a tremendous amount with banks writing off more than £2 billion in a single quarter of the year. 

In recent years, debt write-offs have fallen much lower with banks and credit card companies writing off £339 million in the first quarter of 2020 (the first quarter ended on 30th March 2020). 

debt in uk

Average Financial Burden with Respect to Region 

When you go over from region to region in the UK, you don’t see a lot of drastic differences in terms of how much debt is owed by an individual. 

Most regions show approximately half of its residents having some form of financial debt. For a lot of individuals this is in the form of credit card debt. However, there are people that have other forms of debt as well such as debts stemming from Hire Purchase agreements or mortgages

The East Midlands had the highest number of individuals that had some form of debt (53%) whereas the West Midlands had the lowest (45%). 

A survey was conducted to get an idea of how many residents feel a “heavy burden” from their financial debts.

A lot of Londoners felt that their debts were a “heavy burden” with almost 22% of residents feeling this way. 

On the other hand, only a mere 8% of Scots felt that their debts were a “heavy burden” and were causing them distress. 

Average Financial Burden with Respect to Age Group 

There is a drastic difference when you look at non-property debt that is held by individuals in different age groups. 

Only 23% of people in the 16 – 24 age range have non-property financial debts. In contrast, a whopping 51% of individuals in the 25 – 34 age group have some form of non-property financial debt. This is a huge jump from the previous age group.

After the 25 – 34 age group, the average debt steadily falls. The high amount of debt in the 25 – 34 age group can be explained through a number of factors. 

It’s the age group where most people are trying to get settled and get their life in order. A lot of people in this age group tend to buy a house for which they most likely get a mortgage.

Many individuals also tend to be impulsive during this age and purchase a lot of items they don’t need using their credit cards.

It’s pleasantly surprising to see, however, that of the 51% of individuals in the 25 – 34 age group that have some form of non-property debt, only 13% of them consider that debt to be a “heavy burden”. 

This means that while a large amount of people in that age group have debts, most of them have their affairs in order and they have a plan as to how to pay back those debts. 

The age group that feels the heaviest burden from their debts is the 45 – 54 age group. 43% of these individuals have some form of non-property debts with about 17% of them considering these debts to be a heavy burden that they’re struggling to pay. 

Conclusion 

We’ve looked at UK debts above as well as how the individuals holding these debts feel about them.

While increasing debt can definitely seem like an alarming thing at first, in some regards it’s also a good thing. It’s a sign of an improving economy since it shows that a lot of consumers in the UK are becoming more confident to spend money and borrow more. 

It also means that less debts are being written off by banks every year. This means that a lot of people have their affairs in order and they are able to pay back the money they owe by making the appropriate payments each month. 

That being said, it’s also true that interest on credit cards is very high and this is definitely something that consumers should be aware of. 

Debts on your credit cards is definitely something that can be a burden on a lot of households. It can cause you to have little or no money saved at the end of the month. 

Not having any money saved is definitely something that can lead a lot of individuals into financial ruin. 

At the end of the day, I just have to say that it’s important for consumers to understand how credit cards work. They can be a great tool that can help you out with a lot of purchases but at the same time, you have to be cautious of the risks they have.


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