Personal Debt Set To Rocket To £2.5Trillion By 2020 As Six Million Britons Buy Groceries On Credit

[interestrateripoff]

http://www.dailymail.co.uk/money/cardsloans/article-3030315/Six-million-Britons-forced-borrow-money-just-pay-groceries-says-Debt-Advisory-Centre.html

• Number of households that borrow to pay for groceries has doubled in two years
• Adults owe an average of £29,126 including mortgages
• Household debt predicted to increase by 62 per cent by 2020 largely down to increasing mortgage debt

Millions of families are still struggling to pay their bills and increasing numbers are turning to credit just to pay for food, a new survey suggests.

While the economy continues to strengthen, millions are yet to feel the benefit with as many as 12 per cent of Britons borrowing money just to cover their groceries last month.

This is double the number who turned to credit for groceries in the same month in 2013, the study from the Debt Advisory Centre warned.

People in London and Northern Ireland were most likely to borrow to buy food at 18 per cent, followed by those in Wales at 14 per cent, the survey found.

Surely great news for GDP, isn't this the plan to boost personal debt to get the economy going? Success all round and the public become good little debt slaves and do as they are told by their lords and masters.

[thewig]

how does this end? I can't quite get my head around the exponential debt growth model. Am I a mug for NOT buying into it? Surely it HAS to end in mass default so it makes sense to have some skin in the game?

feels like everything is backwards.

[mikthe20]

It's as if the last 8 years never happened.

[doomed]

how does this end? I can't quite get my head around the exponential debt growth model. Am I a mug for NOT buying into it? Surely it HAS to end in mass default so it makes sense to have some skin in the game?

feels like everything is backwards.

The only way I can see it ending is sterling getting turned into toilet paper.

[interestrateripoff]

how does this end? I can't quite get my head around the exponential debt growth model. Am I a mug for NOT buying into it? Surely it HAS to end in mass default so it makes sense to have some skin in the game?

feels like everything is backwards.

In theory the exponential debt model never ends as the numerical numbers have no limit as the Weimar etc... show, but to the human mind it starts to become ridiculous especially if you imagine paying £1,000,000,000 for a snicker. We'd end up having to revert to using real billions instead of fake ones.

However the logic of the exponential debt model is that debt it totally irrelevant, perhaps it is.

[porca misèria]

Very silly spin.

I always buy my groceries on credit. The creditcard is just convenient, and the cashback is icing on the cake. Doesn't mean debt: the direct debit pays off the card every month. As it has since I first got a card in the 1980s (with the exception of the time I bought an annual season ticket to commute to a new job, and took about three months to pay it off).

[Greg Bowman]

Very silly spin.

I always buy my groceries on credit. The creditcard is just convenient, and the cashback is icing on the cake. Doesn't mean debt: the direct debit pays off the card every month. As it has since I first got a card in the 1980s (with the exception of the time I bought an annual season ticket to commute to a new job, and took about three months to pay it off).

That's exactly what I thought

[billybong]

• Number of households that borrow to pay for groceries has doubled in two years

It's made to sound as if there's real "austerity" around so the Conservative/Libdem's austerity policies must be working.

More people use the card - that's one of the reasons the queues are so long in some places. Forgot the pin number etc.

Edited April 8, 2015 by billybong

[renting til I die]

Very silly spin.

I always buy my groceries on credit. The creditcard is just convenient, and the cashback is icing on the cake. Doesn't mean debt: the direct debit pays off the card every month. As it has since I first got a card in the 1980s (with the exception of the time I bought an annual season ticket to commute to a new job, and took about three months to pay it off).

+1, I do exactly the same.

[FreeTrader]

I don't really understand why the media keep buying into the OBR's household debt projections.

Between the Autumn Statement (3 Dec) and the Budget (18 Mar) the OBR chopped its 2020 debt projection by £144bn. They had to because households simply aren't borrowing at the rate they expected.

Even with this revision, when the Quarterly National Accounts were published a week ago the figures showed that the OBR had overestimated debt growth in Q4 2014. The forecast was for a rise of £18bn whereas the actual number was £13bn.

[tinker]

Same here, will buy on credit but clear at the end of the month. Additionally, for big stuff a long term balance transfer can be helpful to budgeting and good value.

[dances with sheeple]

Very silly spin.

I always buy my groceries on credit. The creditcard is just convenient, and the cashback is icing on the cake. Doesn't mean debt: the direct debit pays off the card every month. As it has since I first got a card in the 1980s (with the exception of the time I bought an annual season ticket to commute to a new job, and took about three months to pay it off).

Doesn`t mean everyone does this though? Many probably pay minimum payment each month, or leave an outstanding balance. The rise of food banks means people can`t juggle the wages/debt/benefits like they used to?

[FreeTrader]

For info, the BBA publishes total credit card market stats.

At the end of Feb 2015, the amount outstanding on CCs was £59bn, and the percentage of balances bearing interest was 59.2%.

In comparison, at the end of Feb 2009 £65bn was outstanding, with 73.5% of balances bearing interest.

You can find the numbers in a spreadsheet here.

[Greg Bowman]

Doesn`t mean everyone does this though? Many probably pay minimum payment each month, or leave an outstanding balance. The rise of food banks means people can`t juggle the wages/debt/benefits like they used to?

I think food banks are a moot point frankly undoubtably on the rise and a saver for many people but whose to say that

1. Many canny people on their way to FI are going free food - thanks

2. Some benefits claimants thinking ah food here for free I can spend more on Fags/booze/ bingo

3. Already the food bank movement has a whiff of the corporate charity world about it

4. Any new supply of anything will create a demand for something it set out to minimise - extra lanes on motorways for example

Edited April 9, 2015 by Greg Bowman

[zugzwang]

For info, the BBA publishes total credit card market stats.

At the end of Feb 2015, the amount outstanding on CCs was £59bn, and the percentage of balances bearing interest was 59.2%.

In comparison, at the end of Feb 2009 £65bn was outstanding, with 73.5% of balances bearing interest.

You can find the numbers in a spreadsheet here.

Thanks for that link, FT.

I share your scepticism about the OBR's household debt projections. They look absurd. Anything above 140% of gross disposable income is thin air indeed, and quite unsustainable (see below, and Steve Keen for an explanation). Given that UK household debt/disposable income currently stands at ~145% expectations of a substantial re-leveraging to come are almost certainly mistaken.

Chart taken from here

[Digsby]

Very silly spin.

I always buy my groceries on credit. The creditcard is just convenient, and the cashback is icing on the cake. Doesn't mean debt: the direct debit pays off the card every month. As it has since I first got a card in the 1980s (with the exception of the time I bought an annual season ticket to commute to a new job, and took about three months to pay it off).

So if using the credit card for groceries is purely because of the convenience for everyone, like yourself, why has the number of those doing so doubled?

I don't imagine that millions of people have suddenly had a eureka moment where they realise how much more convenient a credit card is over a debit card for groceries.

That the behaviour has changed because people are building their credit ratings in preparation for taking on jumbo mortgages would be a more plausible alternative explanation.

[South Lorne]

http://www.dailymail.co.uk/money/cardsloans/article-3030315/Six-million-Britons-forced-borrow-money-just-pay-groceries-says-Debt-Advisory-Centre.html

Surely great news for GDP, isn't this the plan to boost personal debt to get the economy going? Success all round and the public become good little debt slaves and do as they are told by their lords and masters.

• "Adults owe an average of £29,126 including mortgages"

..these figures mean nothing ...mortgages are secured lending (against the property) ...and does that average include homeowners (now in the majority who have no mortgage) .while say credit cards are unsecured ...we need to see the figures split out before analysing or it will be rubbish in ..rubbish out... as usual...

http://www.cityam.com/210261/uk-property-market-number-mortgage-free-homeowners-now-outstrips-those-property-loan

[porca misèria]

So if using the credit card for groceries is purely because of the convenience for everyone, like yourself, why has the number of those doing so doubled?

I don't imagine that millions of people have suddenly had a eureka moment where they realise how much more convenient a credit card is over a debit card for groceries.

That the behaviour has changed because people are building their credit ratings in preparation for taking on jumbo mortgages would be a more plausible alternative explanation.

1. Perhaps it has something to do with the ever more widespread acceptance of creditcards? There's an inconvenience factor if your local greengrocer, newsagent, or market stall might not accept them.

2. Debit cards? Not really different, just newer: some of us got into the creditcard habit long before debitcards came onto the scene. And the creditcard still has the extra convenience of not having to watch a bank balance through the month (though a debit card with an interest-paying account does that job too). Apart from mere habit, the cashback is really what persuades me to use the creditcard for mundane groceries.

[hp72]

I don't know how much of an influence it has had, but Aldi and Lidl in England have only been accepting credit cards for the last 6 months or so. This may influence the figures when taking into account demographics and the huge increase in their customer base in a corresponding timescale.

[Noallegiance]

For info, the BBA publishes total credit card market stats.

At the end of Feb 2015, the amount outstanding on CCs was £59bn, and the percentage of balances bearing interest was 59.2%.

In comparison, at the end of Feb 2009 £65bn was outstanding, with 73.5% of balances bearing interest.

You can find the numbers in a spreadsheet here.

The above doesn't include the monumental amount of accounts in B/Os, IVAs, DAS and DROs that have balances on but do not accrue interest. In 2015 the size of the debts incurring no interest because the credit card users are in trouble is staggering. I see approximately £1,000,000 written off circa every 2-3 weeks in ONE department of ONE financial institution dealing with ONE credit product line where customers cannot pay the remaining balance.

This can completely change the perception of the above figures. It could be that more people were managing not to get into financial hardship in '08 than today. Just over a year ago I saw a report from Step Change Debt Charity stating that in LESS THAN ONE WEEK they had taken on £247m of NEW debt to manage on behalf of struggling UK consumers.

It would be interesting to know how many of the zero interest bearing balances were continuous full payers.

The overall credit card debt may be down circa 9-10% since 09 but a 14% drop in interest bearing balances isn't necessarily great. Departments at banks set up to deal with struggling customers (a part of the strategy being to suspend interest and charges in the interests of being fair) are expanding. Only this very month the FSCS has felt the need to release new guidelines on 'vulnerable cusytomers' which basically make everyone vulnerable at the slightest iffy moment.

One paradoxical comment in the report - household finances have improved so people are borrowing more. Eeeeeeeeeeeerm...........

All is not well.

[Bill D'arblay]

I don't know how much of an influence it has had, but Aldi and Lidl in England have only been accepting credit cards for the last 6 months or so. This may influence the figures when taking into account demographics and the huge increase in their customer base in a corresponding timescale.

I always admired Lidl & Aldi for standing up to the bankster rentiers and refusing to take credit cards.

Now I am subsidising the 'convenience' and 'card tart' crew, above, by 3% every time I pay cash there.

I wonder if that 3% ripped off the cash customers is paying for those fancy new ads aimed at the skiers and Aga range people. God I hate this country!

Edited April 16, 2015 by Bill D'arblay

[OurDayWillCome]

• "Adults owe an average of £29,126 including mortgages"

..these figures mean nothing ...mortgages are secured lending (against the property) ...and does that average include homeowners (now in the majority who have no mortgage) .while say credit cards are unsecured ...we need to see the figures split out before analysing or it will be rubbish in ..rubbish out... as usual...

http://www.cityam.com/210261/uk-property-market-number-mortgage-free-homeowners-now-outstrips-those-property-loan

That figure stood out for me too. Absolutely meaningless - now if they gave average debt for 20-30, 30-40, 50-60, 60-70 age groups it would be much more useful and I suspect very scary!

[sPinwheel]

I buy my groceries by credit. And pay it off each month.