The continued effect of high costs and inflation have led to sustained high consumer spending on credit cards, alongside decreasing repayment rates, according to FICO.
The FICO UK Credit Card Trends 2023-24 revealed the average spend per UK credit card reached £850 in December 2023, which is the highest amount since FICO records began in 2006.
The percentage of payments being made compared to overall balances has been declining since July 2023. Following a peak of 42% in May 2022 due to lockdowns and increased savings, it has now decreased to 36.4%.
The trend of increased spending and reduced repayments has caused overall card balances to remain higher compared to the previous year.
FICO said: “As spending and balances increase and remain high, risk teams should review the number and amount of credit card limits being offered to ensure they increase in line with these higher balances.”
The report also found that when compared year-on-year, the number of customers missing one, two or three payments increased almost every month.
Before the pandemic, the number of customer missing payments was always higher for the segment of customers that had held the card for less than 12 months.
According to FICO, this was expected because this group of customers had recently acquired cards, so they were more credit-hungry and less likely to miss payments. This group also included first-party fraudsters who have no intention of repaying their balances.
However, since the pandemic those who have held a credit card for between one and five years are now more likely to miss payments.
This is because these customers are likely to have taken out cards during the pandemic, when their affordability may have been better due to a lack of spending opportunities and increased savings.
Also, many of these customers would have come to the end of promotional balance transfer offers at a time when interest rates are higher than they were previously.
