Credit card debt: the crunch yet to come

We’ve been bingeing on plastic for the past decade, says Matthew Lynn, and the £54 billion we owe as a result is about to knock another hole in the banking system

One year on from the period of panic that followed the collapse of Lehman Brothers, you might be forgiven for thinking the worst of the credit crunch was over. The banking system has steadied. The stock market looks perky. The housing market is limping out of the convalescent ward.

The trouble is, you’d be wrong. The credit crunch has a nasty little sibling, with whom we are yet to be fully acquainted. Call it the credit card crunch — except it’s not so much a crunch as the financial equivalent of a full-scale pile-up on the M1. The British, like the Americans, have been bingeing on plastic for much of the past decade. Now, as unemployment rises and fresh credit dries up, many people will be unable to pay the enormous debts they have run up on their card accounts.