The amounts of money owed on credit cards evaporated in October at the fastest annual rate since the coronavirus pandemic started, according to a trade association.
UK Finance said outstanding balances on credit card accounts fell by 14.7% in the year to October 2020 to £58.2 billion, as people paid back higher amounts on their plastic than the amounts they newly spent.
It marked the biggest 12-month fall since the pandemic started, UK Finance said.
Eric Leenders, managing director of personal finance, UK Finance, said: “Outstanding balances on credit card accounts fell for the eighth month in a row, reaching the largest drop over a 12-month period since the pandemic began – indicating that more people were paying off debt, or fewer making use of credit.”
There were 1.7 billion debit and credit card transactions in the UK in October, marking a 0.4% decline from September and 3.6% lower than in October 2019.
These transactions amounted to a total spend of £64.2 billion.
The proportion of spending made using contactless cards also fell, which UK Finance said reflected Covid-19 restrictions.
Just over four in 10 (41%) card transactions were contactless in October, compared with 44% the same month a year earlier.
Sarah Coles, personal finance analyst at Hargreaves Lansdown said: “The number of cards offering 0% interest for a period on balance transfers fell through the floor in 2020, while the remaining deals shortened significantly, and banks tightened their lending criteria to make it much more difficult to qualify for a deal. October was a miserable time to be searching for a balance transfer deal unless you had a glittering credit record.
“But while we haven’t been able to use our favourite trick for cutting interest, we’ve been working hard to get back on track, and have spent the crisis tackling credit card debts.
“And there’s better news for balance transfer enthusiasts in 2021. Since December, we’ve seen the number of interest free balance transfer deals pick up a little, and existing deals lengthen again.
“This kind of movement is common around this time of year, as banks tweak their offering to attract people’s festive debts. So if you’re trying to cut your interest rate while you pay off your credit card debts, it’s worth taking advantage of these deals now if you can.”