Credit card spending set to dive

CREDIT card spending is set to fall to its lowest level in four years with UK cardholders expected to spend 30% less on plastic in the next three months.

Britons expect to spend only £730 on credit cards in the first three months of 2005, compared to the £1,036 they planned to spend in the fourth quarter of 2004, according to the latest figures from the Morgan Stanley Card Index. This is the lowest since the index began four years ago.

Men expect to spend 19% more than women in the first three months of the year (£803 compared to £649), continuing the trend from the final quarter of 2004, when men predicted they would spend £1,116 against women's £977.

Key areas of spending for men are on the home and car (£259 against £115). The main expenditure for women will be on grocery shopping at £214.

People from Yorkshire and Humberside will tighten their belts the most as they plan to spend just £334 between now and March. This is less than half the national average of £730. Londoners predict they will spend the most at £1,077 - a hefty 70% more than the prudent people of Yorkshire.

The Morgan Stanley Card Index, which is the only study to look at predictions on card spending, asked 2,000 adults how much they intend to spend on a variety of items over the next three months.

Holiday and travel will be the only area of credit card spending to increase in the first three months of 2005 - up 16% from the last three months of 2004 (£182 compared against £153).

People in their 40s plan to spend more than any other age group at £867. The biggest items on their bill for the next three months are expected to be the home and car at £325. Young people (aged 18-19) with a credit card will spend the least at £491, with their biggest spending on clothing, health and beauty at £228.

Patrick Muir, marketing director for the Morgan Stanley Credit Card, said: 'Consumers are planning to tighten their belts in more senses than one after the Christmas period. Intended spending seems to have dropped sharply - but people are still planning to use the flexibility of their credit cards to pay for items like food and travel over the coming months.'

Meanwhile there was more evidence today that the end of 0% credit card deals could be close, with figures from uSwitch.com showing that consumers are wising up to the savings the deals can provide.

According to uSwitch.com, nearly a third (30%) of customers who visited the website in December 2004 selected to pay off their credit card balances in full compared to only 21% in October.

The average amount requested for balance transfers reduced from £1,199 to £1,102 between October and December, and during the same period six in ten consumers requested balance transfers.

But credit card providers are now cracking down on the savvy consumers by imposing stricter conditions on card holders who fail to meet monthly payments. Some issuers will automatically switch you from a 0% to a higher rate if a payment is missed.

Others are penalising 'card tarts' who take advantage of the 0% deals by switching to a different deal when their card expires.

Head of personal finance Nick White said: 'The credit card industry has created a rod for its own back with 0% deals.

'Now it is sitting around trying to find ways to make money out of its cards.'