Demand for credit cards is suffering because UK borrowers are turning to other forms of finance, such as payday loans. The PwC report said that credit cards were facing a “mid-life crisis” as people used debit cards, digital payments and payday loans instead.
The number of credit cards in UK circulation and the total amount of credit card borrowing fell in 2011. PricewaterhouseCoopers (PwC) said that UK consumers were turning to other forms of payment, even though the average credit card balance stood at about £1,000.
Ernst & Young Item Club has predicted that this shift to payday lending would continue, especially to poorer borrowers.
Neil Blake, the club’s senior economic adviser said: “Households that fall outside of the credit terms of traditional lenders are increasingly looking toward other credit providers, regardless of the cost,” “With banks expected to further tighten lending conditions, we expect the shift towards alternative lenders to continue unabated.”