There was great news for all types of creditors in September 2012 as consumers took on an extra £1.7billion worth of debt. This debt was taken out over credit cards, personal finance secured over property and the extending or spending of bank account overdrafts.
Only £0.3billion of the amount was taken out on credit cards but the rise in consumer debt as a whole, is a positive sign for the economy in general. Economists always fear for the worst when the consumer is not spending, but when there is an apparent rise in the amount of credit being taken out, it is a positive sign that the consumers feel more confident about spending again.
Consumers tend to spend on food, clothing and anything that would be described as a necessity item all of time, no matter what the economic climate looked like. But when it comes to luxury items, this is when they turn to personal loans, over drafts and of course credit cards. The electrical item market does not slow down at any time even if there are strong signs of recession and with the release of even more cutting edge technologies such as smart phones and tablets, all in the month of September, it is not a surprise to see the use of luxury debt methods rise.
Perhaps we should not read too much into September’s rise in consumer lending as it is clear that many members of the public are not looking too far into what credit deals could best for them, which is not good news for the economy. A healthy economy is one full of savvy spenders.
Will Becker, Chief Executive at money experts Totally Money concurs with that point and explains that:
“The data suggests that consumers are borrowing inefficiently, favouring relatively expensive forms of unsecured credit like loans and overdrafts. It’s encouraging that consumers feel that they are now in a better position to spend as economic confidence grows but it’s disappointing to see that credit card borrowing has actually gone down at a time when they represent far better value for many than the forms of borrowing that are growing.
“This data suggests that large numbers of people don’t fully understand how to access the best value deals and that banks and lenders need to help consumers by being more transparent”.