The UK Credit Card at Forty

Forty years ago tomorrow saw the launch of a little piece of plastic that would change the spending habits of millions of consumers in the UK. On June 29 1966 Europe’s first all-purpose credit card, Barclaycard, was launched in Britain.

The interest rate was 19.6% a year and his first credit limit was only £400, but that went a long way back then, with a pint of beer costing around two shillings, or 10p. In contrast to today’s astronomical prices, a gallon of petrol cost 5s 3d, or 26.5p. One of the most popular cars in the UK at the time, the Ford Cortina, cost £485 brand new – but the worker who built it earned £17 per week and his manager only £30.

Barclaycard launched with a million customers, all of whom had accounts with Barclays Bank, and 30,000 retailers signed up to accept it. It remained unchallenged in the UK and was advertised by a host of celebrities at the time.

Since then the UK finds itself awash with 1300 different credit cards, with 66 million individual pieces of plastic issued to 30 million cardholders. Barclaycard itself now has more than 11 million cardholders in the UK alone with its annual interest rates varying from 14.9% to 24.9%.

Credit cards are now accepted almost everywhere in the UK from large retailers to some businesses, with consumers enjoying the convenience of their plastic using it to pay for most everyday purchases and services.

In 2004, for the first time plastic overtook cash as the most popular form of payment. There are now more than 50 credit-card transactions every second in the UK, and spending on credit cards last year reached £124bn.

"Credit cards have changed enormously over the years and so has the way people use them," says Patrick Muir of Morgan Stanley. "Britons are increasingly likely to shop around and see how they can be rewarded for their spending with loyalty schemes such as cashback, in addition to taking advantage of the interest-free period that many cards offer."

However, while millions of Britons enjoy the various uses of the credit card, it has contributed to the UK’s rising debt problem which has risen dramatically in recent years, topping £1 trillion. Most of that personal debt is owed on mortgages, personal loans, and credit cards.

The number of 18 to 24-year-olds with debt problems it counselled rose from 6% to 11%, and their average amount of debt rose 26% in two years to £15,079. Citizens Advice says credit-card problems have doubled in the past eight years – and, along with personal loans, account for 75% of the 1.25 million new debt cases it handled last year.

Alisdair Milton
30th June 2006