Will Seasonal Credit Card Spending Soon Become Obsolete?

By: Elisha Burberry

With Britain's levels of credit card debt having exploded over the last decade, money experts and consumer bodies have begun to keep a closer eye on the patterns of credit card usage across each month. A recent study released by the British Bankers Association (BBA), for instance, claims that credit card borrowing over the last few months has dropped. To many, this reduction in spending has come at the traditionally slow period in credit card borrowing - indicating a predictable seasonal dip in credit card usage.

However, figures of credit card spending over the last six months appear to have confounded conventional seasonal patterns in credit card spending. Usually, UK consumers are known to use their credit cards heavily in December and the months surrounding the Christmas period. However, figures released by the BBA in early January show that credit card borrowing in December 2006 fell by ?0.3bn, while overall consumer credit over the course of the year grew by only two per cent. At the time, David Dooks - the BBA's director of statistics - commented:

"The annual growth in consumer credit, at only 2%, is low by historical comparison and, although strong Christmas sales have been reported, our December figures suggest that spending was not fuelled by more borrowing on credit cards."

The BBA's most recent report shows that over the past six months, credit card borrowing has reduced by an average of ?144 million each month - although the reduction in April was short of this by ?1 million at a ?143 million drop. The constant fall in credit card borrowing since October last year seems to defy seasonal patterns. This time, David Dooks explains:

"High house prices and increasing monthly repayment costs are causing a slow down in the mortgage market and people are using money from their accounts instead of borrowing to meet their spending needs."

It certainly seems as though the four rises in the Bank of England base rate that have occurred since August 2006 have had an impact in consumer credit card spending. With an effective cap on the mortgage market in place, consumers have begun to spend from their accounts rather than with their credit cards.

Another reason for the drop in credit card borrowing could be attributed to better planning of seasonal spending. For instance, many consumer credit agencies recommend better planning of seasonal purchases months before Christmas arrives - budgeting for greater spending levels at Christmas is likely to reduce the burden on your levels of credit card debt and consumers may have heeded this advice.

If you're planning to apply for a credit card, or switch to a new credit card provider, make sure you choose one with a longer balance transfer or interest-free period. This will make it easier for you to maintain your seasonal levels of spending, while still remaining in control of your levels of credit card debt.

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