UK credit card issuer data shows uplift in spending and payments

New UK credit card issuer data has been released for the period June and July 2020, the below is an analysis of UK credit card trends post COVID-19.

The data on the UK credit card market is taken from the UK’s leading credit card issuers through FICO Benchmark Reporting Service. FICO’s data from June and July 2020 activity provides a clear picture of the ongoing impact of COVID-19 on finances.

After the dramatic fall in average spending on UK credit cards for January to May 2020 (down 27{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} year on year), spending in June started to increase, up 13{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} on May and by a further 11{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} in July to £598. For the period January-June 2020, spending on cards dropped 8{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} year on year.

In line with the increase in average spend, the percentage of active accounts started to stabilise and marginally increased in both June and July, although it is still 6{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} lower than in July 2019. But consumer caution was still evident, with the percentage of the card limit utilised on active accounts reaching another over two-year low.

During June and July, overall card limits again reached their highest levels since at least 2002 and remain noticeably higher than in April 2008, during the last financial crisis. The highest percentage of accounts (30{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f}) have limits in the range of £5,001 to £10,000; however, their average balance is £1,207.

Accounts over their limit continue to fall

The percentage of overlimit accounts continued to drop in both months, although the rate is slowing. It was 41{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} lower than a year ago. However, for those accounts that are over their limit, the average amount continues to increase and is 32{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} higher than a year ago.

The percentage of payments to balance fell in June (reaching over a two-year low), but in July increased to 28{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} although they are still 14{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} lower than July 2019. The percentage of consumers paying less than the amount due decreased in June and July, potentially as more consumers requested a payment deferral. However, the percentage of consumers paying the amount due increased 27{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} in June and levelled off in July, at 9{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} higher than a year ago.

New account openings begin to stabilise

June and July saw the fall in the percentage of new accounts (compared to total accounts) stabilising, although it is 59{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} lower than a year ago; new account openings January vs. July was also 45{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} lower, compared to a 47{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} increase in the same period in 2019.

Unsurprisingly, given the big focus on contactless and online payments during the height of the pandemic, the proportion of cash spend on cards to total spend continued to decrease in June and July, reaching another over two-year low, 35{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} lower year on year.

In the period January to July 2020, the percentage of consumers using cash on cards fell 50{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f}, compared to 3{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} growth in the same period in 2019.

“The increase in spending in June was expected, as additional business sectors were able to reopen. And with further restrictions lifted in July on hotels, gyms and attractions, this trend continued. Although regional lockdowns were introduced, as consumer confidence grows or as consumers turn to credit cards as the only spending option, we expect that spend will continue to increase in the coming months,” explains Stacey West, principal consultant for FICO Advisors.

“With the spending options expanding and starting to include higher-ticket sectors, we expect further card usage in the coming months. The concern is whether that extra available credit is affordable to the consumer, especially when the government support and payment deferrals end, and particularly if this is the only spend option they have.”

“It may take many months for the confidence to offer new credit to consumers to increase, as uncertainty remains as to the level of financial difficulty that will emerge into 2021.”