TL;DR: Credit cards are not automatically bad, but carrying a balance in 2026 is expensive. UK households are still adding consumer debt, effective rates on interest-charging cards remain above 21%, and minimum repayments can keep borrowers trapped for years. Used carefully, cards can still provide protection, rewards and short-term flexibility, but revolving debt should not become part of the monthly household budget.
Credit cards are not automatically bad. Used properly, they can give you purchase protection, rewards, a short interest-free window and a useful way to build a credit history.
The problem starts when a credit card stops being a payment tool and becomes part of the monthly household income.
That distinction matters in 2026 because British households are still adding consumer debt while the cost of carrying a balance remains brutally high.
Britain is still borrowing
The latest Bank of England monthly data available at the time of writing shows households borrowed a net £1.7 billion in consumer credit during May 2026. Around £0.6 billion of that came through credit cards.
That does not mean £0.6 billion of new financial distress. People borrow for all sorts of reasons and many clear their balances in full. But it matters because revolving card debt is one of the most expensive mainstream ways to borrow when the balance is allowed to sit there.
Bank of England data has recently put the effective rate on interest-charging credit cards at more than 21%. At that sort of rate, carrying a balance is not a small inconvenience. It can become a compounding problem.
What 21% interest actually looks like
| Card balance | Approx annual interest at 21% | Balance + interest* |
|---|---|---|
| £1,000 | £210 | £1,210 |
| £3,000 | £630 | £3,630 |
| £5,000 | £1,050 | £6,050 |
| £10,000 | £2,100 | £12,100 |
*Simple illustration only. Actual card interest depends on APR, daily balances, repayments, fees and the card’s terms.
This is why minimum repayments are dangerous when they become a long-term habit. They can make a large debt feel affordable month to month while doing relatively little to kill the underlying balance.
FCA research has previously found that repeated minimum or very low repayments can leave borrowers making little progress while interest costs accumulate. The regulator’s persistent-debt rules require card providers to intervene when customers remain in problem debt for extended periods.
The minimum payment trap
Imagine you owe £5,000. The statement arrives and the minimum payment looks manageable, so you pay it and move on.
Next month you do the same. Then again.
The card is technically being serviced, but your financial position may barely be improving. Worse, if you continue spending on the card while making minimum repayments, you can end up running simply to stand still.
A minimum payment is the amount required to keep the agreement on track. It is not a recommendation for how quickly you should repay the debt.
Why this feels different in 2026
Households have spent the past few years absorbing higher food bills, rent, mortgages, energy and other essential costs. Credit can smooth a temporary cash-flow shock, but it becomes dangerous when it is repeatedly being used to bridge a permanent gap between income and spending.
The Bank of England’s Q2 2026 Credit Conditions Survey adds another warning. Lenders reported that unsecured credit availability increased in the three months to the end of May, but they expected it to decrease in the following quarter to the end of August.
In plain English, credit conditions can tighten precisely when financially stretched households would most like access to more borrowing.
Credit cards can still be useful
I do not subscribe to the idea that everybody should cut up every credit card. That ignores how the product actually works.
- Paying the statement balance in full can mean paying no purchase interest.
- Eligible purchases can receive Section 75 protection where the legal requirements are met.
- Some cards offer cashback, points or other rewards.
- A 0% purchase or balance-transfer offer can reduce interest when used with a realistic repayment plan.
But rewards only make financial sense if the rewards are worth more than the costs. Paying £500 of interest to collect £100 of points is not a travel hack. It is an expensive loan with a free airport coffee attached.
A simple credit-card rulebook
| Do | Avoid |
|---|---|
| Pay the statement balance in full where possible | Treating the credit limit as savings |
| Set up a Direct Debit | Repeatedly making only minimum payments |
| Know when a 0% period ends | Ignoring the revert APR |
| Use rewards only on spending you would make anyway | Spending more just to earn points |
| Ask your lender for support early if struggling | Borrowing from another expensive source just to hide the problem |
What if you are already struggling?
Contacting the lender early is generally better than waiting for missed payments to pile up. Current FCA rules require regulated firms to treat customers in or approaching arrears with forbearance and due consideration and to provide understandable information about their position and options.
If the problem is bigger than one card, free debt-advice organisations can help you look at the entire picture rather than trying to move balances around indefinitely.
What about reward cards?
There is a completely different side to credit cards when you clear them responsibly. I have a video explaining how I think about using credit cards and rewards without pretending the borrowing itself is free money.
If you already pay your balance in full and were considering an American Express Gold card anyway, you can also see my Amex referral offer here. Check the current fee, eligibility, welcome-offer terms and reward conditions yourself before applying. Do not take out a rewards card if carrying the balance would cost you interest.
The bigger point is simple. Credit cards are excellent servants and terrible masters. The crisis is not that cards exist. It is that expensive revolving debt can quietly become normal household finance.
I cover UK personal finance, property and investing on The Anxious Investor on YouTube and shorter updates on TikTok.
Sources: Bank of England, Money and Credit, May 2026; Bank of England, Credit Conditions Survey 2026 Q2; Financial Conduct Authority credit-card persistent-debt research and current CONC arrears guidance. Data checked August 2026.
