Credit card debts rise amid mortgage pressure

Households are still saddled with an average credit card debt of €1,330, amid claims that pressure to repay mortgages has meant higher interest rate debts are going unpaid.

Figures from the Central Bank show the average debt per card is just €20 less than the average debt per card at the end of 2008 — even though the overall amount of personal credit card debt fell by €400m up to the end of last year.

Central Bank head of statistics Joe McNeill said there were fewer credit cards in the system due to some credit institutions leaving the country, but that more work needed to be done to determine who owed what.

Speaking before a meeting of the Oireachtas joint committee on finance, public expenditure, and reform yesterday, Mr McNeill said: “The information available would suggest that many new transactions on credit cards are being repaid but there is a portion of historic debt that is not being reduced significantly.”

Labour senator Aideen Hayden said it was possible to surmise that, in some cases, householders were not dealing with various debts logically. Due to the greater pressure being exerted by mortgage providers, home loans were being paid ahead of other debts — with higher interest rates— such as credit cards.

Mr McNeill said this was “absolutely plausible”.

His colleague Mark Brien told the committee that, while overall levels of debt were being reduced, “legacy issues” were not being resolved in some cases.

The Central Bank statistics division does not have a analysis of the distribution of the non-mortgage debt around the country and Mr McNeill said a new household income survey would be conducted in April, to collect accurate data on the income and financial position of a representative sample of households around the country.

The first results of the survey could be published this summer, while a detailed survey of household income and wealth is being considered for next year as part of a euro-wide initiative. In addition, a centralised credit register is also to be set up, for what Mr McNeill called “micro-level data collected from Irish-owned banks for the stress testing exercises being expanded across all credit providers in the State”.

Richard Boyd Barrett TD said the figures showing debt compared to household income meant that Ireland was in a very bad way, and, due to the lack of specific data, “we cannot see how many people are in much worse circumstances”.

Fianna Fáil senator Thomas Byrne said the figures on personal credit card indebtedness were “frightening” while Senator Hayden said she was aware of “huge competition” between debtors as to who gets paid, with pressure being applied by mortgage lenders often meaning they got paid first.

Mr McNeill said it was difficult to say whether the lack of movement on personal credit card debt was due to the prioritising of payments but said: “It is clear there is a core of historic debt that is not being repaid and is not moving.”

He said that since mortgage debt had taken most of the focus, similar attention had not been paid to non-mortgage debt.

The committee also heard that while households are spending less than they are earning, any net savings are being eaten up through debt repayment.

Debt pile

Credit card woes:

* €3bn: Overall personal credit card debt outstanding at end of 2008.

* €2.6bn: Equivalent figure end 2011.

* €1,350: Debt at end 2008 for each card in circulation.

* €1,330: equivalent figure end 2011.

* €17.3bn: Consumer credit (including car loans, credit cards) at end of 2011.

* New household survey due in April.