The average UK household still has debts totalling £7,900 from loans, credit cards and overdrafts despite three years of belt tightening, latest analysis reveals.
Families typically paid off more than £355 in 2011 as levels of unsecured borrowing fell for the third successive year, according to the PricewaterhouseCoopers Precious Plastic report.
But it added that worrying signs remained in consumers’ ability to continue paying off debts.
This was particularly prevalent among 25 to 34 year olds, where one in four used credit to fund essential purchases in the past year, the report said.
Simon Westcott of PwC said that UK consumers are among the most indebted in the world.
“Although the Government’s austerity drive appears to be hitting home, three years of austerity by consumers has only made a small dent in the total levels of borrowing,” he said.
Meanwhile, the way in which people use credit could be changing, with credit card use dwindling and payday lenders becoming a more mainstream option, according to the report.
Total outstanding credit card debt fell by five per cent in 2011, leaving the average credit card balance at around £1,000.
Meanwhile, debit cards grew 10 per cent last year and for the first time are now used more frequently than cash to make payments.
In addition, as consumers turn away from credit cards or are unable to obtain credit from mainstream lenders, payday loans are becoming more popular, the report suggests.
Mr Westcott added: “Mainstream lenders need to aware that what may have begun as a last resort could be an enduring relationship.”
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