Credit-card companies face problems

With levels of unsecured borrowing falling by over £500 per household in 2010 and the borrowing habits of UK consumers going through significant changes, 2011 looks set to be a difficult year for credit-card and other consumer finance providers, according to PwC's annual report on the UK consumer credit industry.

Mark Hannam, partner and northern head of financial services at PwC, commented: "January is traditionally the time of year when people reflect on their financial situation and our research shows that consumer confidence is still weak. In fact, some 40 per cent of respondents still expect their pay to be reduced or frozen in the coming year.

Consequently, households are seeking to reduce the amount that they borrow. These worries are driving consumers back to 'jam jarring', whereby they shun large loans and open-ended credit cards in favour of smaller, shorter-term borrowing for a particular purchase, in an effort to control their borrowing.

"Therefore it is not surprising that we have seen average unsecured credit fall by some 500 over the last year to around 8,000 per household.

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