FICO UK Credit Card Market Report: June-August 2022


Erratic consumer behavior over summer months illustrates tough conditions for lenders

FICO’s UK Card Trends Report for Summer 2022 (June-August) paints a picture of inconsistent consumer behavior that will be difficult for lenders to manage as the cost of living crisis s ‘installed.

Strong points

  • Average total sales were £790 in June and July and £810 in August, an increase of more than 14% year-on-year for the three months.

  • The increase in the average balance of accounts with one and two overdue accounts continued in June and July, although it stabilized in August; this will always be a red flag for lenders

  • Credit card cash sales rose 6.7% in June and 3.4% in July – another worrying trend for lenders

FICO Commentary

Analysis from the UK’s largest credit card data consortium shows the percentage of consumers using their credit card to withdraw cash has been steadily increasing over the three months – a clear indicator of financial stress , because the interest charged for cash on credit cards is always higher than standard purchases .

Total average credit card sales also increased over the summer. While the media suggests that consumers have reduced their spending in response to the cost of living crisis, this increase in credit card spending illustrates the growing reliance on credit rather than disposable income or savings. The average active balance on credit cards is now at its highest level in more than two years.

The percentage of payments to balance also reflects the pattern of inconsistency seen in the first few months of the year. In June, it fell 3% month-on-month; in July it increased by 1.7%, then in August it fell again by 1.8%.

The percentage of missed payments also sends confusing messages to lenders. In June, cardholders missing a payment remained almost static, but in July they increased by 2.2% and in August they fell by 4.6% compared to the previous month. However, the percentage of cardholders missing two or three payments rose sharply in August compared to July, by 8.5% and 9.3% respectively.

This suggests that cardholders who miss more than one payment may not have the funds to catch up and are struggling with over-indebtedness. There is also evidence that the percentage of cardholders spending over their credit limit has slowly increased since March. This could be another signal that some cardholders are over-leveraged.

Lenders can use segmentation analysis of their portfolios to ensure that their web and mobile applications encourage distressed consumers to get in touch at the first signs of trouble, and consider establishing special payment plans for those who struggle to stay on top.

Key Trending Indicators – UK Charts June 2022

Metric

Rising

month after month

To change

From year to year

To change

Average credit card spend in the UK

£790

+4.7%

+14%

Average card balance

£1,595

+2.4%

+6.8%

Percentage of balance payments

40.81%

-3%

+11.6%

Accounts with a missed payment

1.45%

-0.6%

+1.2%

Accounts with two missed payments

0.26%

+5.8%

-15%

Accounts with three missed payments

0.14%

-12.2%

-12.5%

Average credit limit

£5,510

+0.2%

+2.3%

Average spend over limit

£105

-12.3%

-18.3%

Cash Sales / Total Sales

1.22%

-2.5%

-8.3%

Source: FICO

Key Trending Indicators – UK Charts July 2022

Metric

Rising

month after month

To change

From year to year

To change

Average credit card spend in the UK

£790

-0.1%

+14.7%

Average card balance

£1,615

+1.2%

+8.3%

Percentage of balance payments

41.49%

+1.7%

+7.3%

Accounts with a missed payment

1.48%

+2.2%

-3.4%

Accounts with two missed payments

0.26%

0%

-11.7%

Accounts with three missed payments

0.15%

+7.1%

-21.1%

Average credit limit

£5,515

+0.1%

+2.2%

Average spend over limit

£95

-10.3%

-25%

Cash Sales / Total Sales

1.17%

-4.3%

-8%

Source: FICO

Key Trending Indicators – UK Charts August 2022

Metric

Rising

month after month

To change

From year to year

To change

Average credit card spend in the UK

£810

+2.9%

+14.2%

Average card balance

£1,615

-0.01%

+7.3%

Percentage of balance payments

40.76%

-1.76%

+5.5%

Accounts with a missed payment

1.41%

-4.46%

-1.4%

Accounts with two missed payments

0.28%

+8.5%

-4.24%

Accounts with three missed payments

0.16%

+9.3%

-7.09%

Average credit limit

£5,455

-1.7%

+1.1%

Average spend over limit

£90

-5.21%

-26.02%

Cash Sales / Total Sales

1.02%

-13.01%

-19.37%

Source: FICO

These card performance numbers are part of the data shared with subscribers of the FICO® Benchmark Reporting Service produced by FICO® Advisors, the business advisory arm of FICO. The sample data comes from customer reports generated by the FICO® TRIAD® Customer manager solution used by approximately 80% of card issuers in the UK.

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