There is a clear move on the part of many consumers to pay off their credit card debts, ahead of other money owed such as on mortgages.

Such a trend has been observed by a number of commentators and seen in surveys, with Neil Munroe, external affairs director at Equifax, stating this approach to money owed on plastic is clearly in favour.

He said: "people are reasonably savvy to know that credit card debt has a higher level of interest than other types, so are focusing on that. I think where people have the income and are benefitting from low interest rates on mortgages and the like, they are using the spare money they have to pay down credit card debt."

Mr Munroe said that there are greater problems for those who do not currently have an income that enables them to pay off what they owe on their cards, but said providers are more amenable than they used to be to negotiating a solution.

This includes both a willingness to come up with repayment plans and also greater care when setting credit limits to curb overspending.

At present there is not an increase in debt consolidation, Mr Munroe stated, but this is only because many people are trying other options.

People who owe large sums of money on their cards may wish to seek advice on how to start bringing this under control.

Evidence that Britons are seeking to get away from their old habits of piling up debt on cards has been indicated by the latest Bank of England Trends in Lending figures, which note the growth of credit is much less than it was prior to the credit crunch.

It said that it was clear many consumers are continuing to "pay down" their personal debts and said lenders expect the net flow of consumer credit to remain "subdued" in the months ahead.

Posted by Paul Thacker
 

More evidence has emerged that Britons are weaning themselves off the debt habit.

The latest Bank of England Trends in Lending figures have been produced, with the data for lending to individuals indicating a "subdued" picture, with net flows lower in the three months to February than in the previous quarterly period.

It added that overall lending levels are still "low compared with the period prior to the financial crisis".

One particular feature of this was the trend for credit card debt levels to remain almost unchanged, with net flows running at "close to zero". Moreover, the survey of lenders found a broad expectation that this situation is set to continue for some time at least.

It said: "In recent discussions, the major UK lenders noted that consumers were continuing to pay down personal debt. Looking ahead, some lenders expected net credit card lending flows to be subdued in the coming months."

This situation would add further weight to suggestions that consumers have decided to focus increasingly on getting their own debt under control. In a sense this is echoing the government's own attitude of austerity, with the similar rationale being that paying off the debt today and living within one's means to do so many not be easy, but it will ensure a much brighter future in the longer run.

Indeed, it may even echo the hastily-rewritten text of the prime minister's Conservative Party Conference speech last autumn, when he started by declaring people should be paying off their card bills and then changed it to say that people are doing this – the second being a statement that the latest evidence shows has indeed been the case for many people.

Data published earlier this week showing a greater public focus on debt consolidation came from the latest Lloyds TSB Spending Power Report, which indicated the last year saw a 1.3 per cent rise in debt repayments.

Credit Action's figures have also shown unsecured debt levels to be falling, albeit by only £3 per household in February 2012.

By Joe White

Britons have found their spending power has been squeezed yet further, making life harder for those who are in debt.

This was the conclusion of the latest Lloyds TSB Spending Power Report, which stated that when inflation and pay rates were taken into account, the typical consumer had £113 a year less to spend in February this year than they did 12 months before.

Such developments include a 6.2 per cent rise in spending on essentials, the highest in the survey's history.

However, while this is going on, people are still looking to pay off their debt at a greater rate than in the past, the study noted.

In the year to March 2012, spending on debt repayment rose by 1.3 per cent, despite a series of monthly falls in the back end of 2011 and the level of repayment is now at its highest since the bank began undertaking its Spending Power Reports.

This may suggest many people have decided that instead of stretching themselves to pay for expensive items, they are focusing on essentials and perhaps including in this their debt repayments.

Credit Action's figures have also suggested that consumers are reducing their non-mortgage debt, although its latest statistics – for February 2012 – indicated that the average household unsecured debt dropped by just £3 to £8,002.

Those who do manage to pay off debt can enjoy the potential benefits later on of being able to spend more money in the future as the economy improves.

Commenting on the overall struggles faced by individuals and families, the bank's chief economist Patrick Foley said: "Contrary to expectations at the start of the year, the squeeze on consumers is not yet beginning to ease. Although overall inflation declined in the five months to March, prices of essentials are rising at an increasing rate, whilst at the same time growth in incomes has slowed."

By James Francis

Payday loans have gone from being a seldom used form of credit to a common means of borrowing, a development that could leave many people deep in unpayable debt.

Founder of Moneymagpie Jasmine Birtles said: "In the last couple of years payday loans have become a lot more mainstream."

However, any suggestion that such lending is simply the last resort of those on low incomes may be inaccurate, as the expert added: "I think you have got people in the higher strata of society – people who are actually on wages and on half decent wages – still going to payday loan companies."

She added that pawnbrokers are also doing well at present, as many consumers are continuing to seek finance but being unable to get it from banks, who are less willing to lend than before.

While some people have reigned in spending on credit for extravagant purchases, not everybody has, with some consumers still regarding it as important to have a large budget for events like Christmas and consequently still paying off what they owe in June and July.

With payday loan rates being notoriously high, even those on good pay may find they get into deep trouble if they fail to clear them by the due date and are hit with rollover charges and soaring interest costs.

Consumers who are in deep debt may find a debt management plan can help, with those owing £15,000 or more potentially being in a position to benefit from an individual voluntary arrangement (IVA), should they be in so bad a position there is no realistic prospect of them paying off what they owe.

The financial safety net report by Bright Grey published earlier this month revealed the average British consumers regards the level of debt that can be considered serious as being close to the level at which an IVA could be sought, at £14,416.

Andrew Smith from Cleardebt says: "There is a role for payday loans as a substitute for the much more expensive un-arranged overdrafts that the mainstream banks offer. But people have to be disciplined and remain in control. And that's what many find difficult."

By Joe White