For the first time in four years, borrowing on credit cards and personal loans is back on the rise. Vicky Shaw takes a closer look 

AFTER years of cautious consumer behaviour following the economic downturn, annual household borrowing on credit cards and personal loans grew for the first time in four years in August.

People also spent more on their credit cards than they paid back over the month, in a break from the more cautious trend of recent years.

In August, some £8.4bn of new spending was recorded on credit cards, while £8.3bn worth of repayments were made, the British Bankers’ Association (BBA) found.

While the figures do not suggest people are rushing to pile themselves up with extra debt, the BBA sees them as an indication that consumer confidence is improving, a view which has been supported in several recent reports.

Some have said that home owners have been given a boost by the fact that house prices are back on an upward march, while others have suggested that some people are finding it a bit easier to put money away in savings.

Consumers who feel able to take on more debt are being offered some great deals on loans and credit cards as providers ramp up competition to attract new customers, as low interest rates continue.

Card providers have been battling it out to stretch the length of their nought per cent introductory offers.

Paul Lawler, from Money- Supermarket, said some unprecedented borrowing deals have been launched onto the market.

He highlights a Barclaycard credit card which offers borrowers a nought per cent introductory rate on transferred balances for 28 months.

Some supermarkets are also offering among the most competitive credit card deals in the battle to attract consumers.

Tesco’s Clubcard credit card has a nought per cent introductory rate on purchases for the first 18 months, while M&S Bank is offering the same for 15 months.

Meanwhile, for those looking for low balance transfer deals to reduce the cost of existing debt, Halifax has just announced that all new customers taking out its All In One credit card will pay an effective balance transfer fee of just 0.8 per cent.

New Halifax customers will continue to receive a 15- month interest free period on both balance transfers and new purchases.

M&S Bank also ranks highly on MoneySupermarket’s tables for its personal loans, offering an annual five per cent interest rate on a £7,500 loan taken out over five years and a 6.9 per cent rate on a £5,000 loan taken out over three years.

Meanwhile, Sainsbury’s Bank offers a rate of 6.8 per cent for a £5,000 loan borrowed over three years.

Mr Lawler says that if you need a loan of nearly £7,500, it can be worth borrowing a little bit more to make sure you go over this threshold, as several providers drop their borrowing rates sharply for people taking out loans of £7,500 or more.

But he added: ‘‘If you only want £3,000 there’s no point borrowing £7,500.’’ Rachel Springall, from financial information website Moneyfacts, also cautions that borrowers may not necessarily be offered the advertised rate by a provider, who will look at your personal circumstances to work out the rate you will end up with.

She said: ‘‘Cheaper finance is readily available to many.

“However, the advertised rates are only offered to 51 per cent of successful applicants, so there is no guarantee borrowers will get the lowest rates.

‘‘As with any debt, borrowers should avoid making late payments – this way they can keep a clean credit rating.’’ While the BBA’s figures are a sign that people are becoming slightly more willing to take on debt, there is also evidence that after years of tough times thrifty behaviour is here to stay.

Some experts have pointed out that many people are not necessarily turning to borrowing out of choice, but because they feel forced to take on more debt due to continued high living costs and stagnant wages.

Another new report suggests that the downturn has fundamentally changed our money spending habits as we all keep a tighter control on the purse strings.