THE AVERAGE amount owed on Irish credit cards has fallen by just €20 since the height of the boom as consumers struggle to pay off debts run up before the recession took hold.
An Oireachtas committe heard that average bills have remained constant, despite repayments outstripping new spending for more than three years and consumers clearing €400 million from balances since the end of 2008.
The scale of the personal debt crisis confronting hundreds of thousands of Irish people was outlined in a statistical overview of personal non-mortgage debt given to the Oireachtas committee on Finance, Public Expenditure and Reform by the Central Bank’s head of statistics Joe McNeill yesterday.
According to the Central Bank’s figures, the average amount owed on Irish credit cards peaked at the end of 2008 at €3 billion or approximately €1,350 per card. Mr McNeill told the committee that since then repayments had exceeded purchases significantly and by the end of last year the amount of credit card debt owed had fallen to €2.6 billion.
He said part of the fall could be attributed to lenders such as the Bank of Scotland exiting the market and he pointed out that as there are now fewer credit cards in circulation “the average debt per card has not fallen significantly and currently stands at €1,330”.
He said the marginal fall suggested that “many new transactions on credit cards are being repaid but that there is a portion of historic debt that is not being reduced significantly”.
The committee also heard that the interest rates being charged on credit card debt in Ireland was substantially more than elsewhere in the euro zone with Irish consumers being expected to pay a rate of interest on short-term loans of 1.5 per cent more than the euro zone average. Mr McNeill said he was unable to say why this differential existed.
He also said financial assets held by Irish consumers had fallen by more than €200 billion between the end of 2006 and the end of last year, with much of the fall explained by the collapse in the property market. The total level of household debt in the Republic stands at €190 billion with 70 per cent of the debt being accounted for by mortgages.
Sinn Féin’s finance spokesman Pearse Doherty said banks were frequently asked to take write-downs on mortgage debt, which is secured, and suggested that the same demands should be put to credit card companies who could be forced to “take a hit” on the amounts owed to them by consumers struggling to make ends meet.
Several committee members suggested that more should be done to help consumers struggling to clear historic credit card debt by converting high-interest loans such as overdrafts and credit card debt into more affordable term loans.