Credit cardholders change repayment habits

New industry figures suggest that there has been a dramatic change in the way British people use credit cards and, contrary to widespread belief, they are no longer running up huge debts on plastic.

New industry figures suggest that there has been a dramatic change in the way British people use credit cards and, contrary to widespread belief, they are no longer running up huge debts on plastic.

Latest data from the Association for Payment Clearing Services (Apacs), which is owned by all the major banks, shows that 77 per cent of credit-card spending last year was incurred by people who always repaid in full in the next billing period, and a further 8 per cent was incurred by those who usually repaid in full. Another 12 per cent was incurred by "revolvers", who carry a balance forward on at least one of their cards but who pay more than the minimum. Only 3 per cent of spending in 2003 was by people who made the minimum repayment in any one month.

Sandra Quinn, Apacs director of corporate communications, said: "The analysis of 2003 spending and repayment patterns shows that the overwhelming majority of credit-card customers always or regularly repay in full. Only a minority, representing a relatively low amount of spending, make the minimum repayment in any one month. This is an ever-changing group."

In a typical billing cycle 54 per cent of credit-card holders by number always repaid in full, 11 per cent usually paid in full and only 12 per cent made the minimum payment. The remaining 23 per cent consisted of cardholders who carried a balance forward but made more than the minimum repayments.

This is in vivid contrast to the rule of thumb of credit-card spending, which has long perpetuated the belief that a third pay in full in each month, a third pay off part of their debt and a third pay the minimum.

The data came from the 2003 Consumer Payments Survey, which polls consumer spending and payment behaviour throughout the year. A representative sample of 4,000 people was surveyed by market research firm Ipsos UK during 2003, the first year in which credit-card repayment patterns were monitored.

The figures for those who pay the minimum include people who take advantage of introductory offers on cards, such as zero per cent interest rates for balance transfers, where no interest is payable if only minimum repayments are made for the life of the offer.