FICO UK Credit Card Market Report: August 2024

Rhea-AI Summary

FICO's UK Credit Card Market Report for August 2024 reveals concerning trends in consumer credit behavior. Average credit card spending increased to £835 (+2.3% month-on-month), while payment-to-balance ratios declined by 3.2% to 36.6%. Average balances rose to £1,825 (+1.2% month-on-month, +5.4% year-on-year). Notably, accounts with missed payments increased significantly year-over-year across all delinquency categories. Only 44% of customers use direct debit for payments, with newer customers showing declining adoption. While cash usage increased 1.3% month-on-month to 3.5%, it remains 4.2% lower than August 2023.

Positive

• Credit card spending increased by 2.3% to £835
• Average credit limit increased by 2.4% year-on-year to £5,730
• Cash usage on cards decreased 4.2% compared to August 2023

Negative

• Payment-to-balance ratio decreased 5.5% year-on-year to 36.6%
• Average balances increased 5.4% year-on-year to £1,825
• Accounts with one missed payment increased 8.6% year-on-year
• Accounts with two missed payments rose 6.6% year-on-year
• Accounts with three missed payments increased 7% year-on-year
• Low direct debit adoption rate at 44% with declining trends among new customers

Insights

Financial Market Analyst

The latest FICO credit card data reveals concerning trends in UK consumer credit health. The 5.4% year-on-year increase in average balances to £1,825, coupled with declining payment rates, signals growing financial strain among cardholders. Most alarming is the significant spike in delinquencies - accounts with one missed payment up 8.6% year-over-year, while three-payment delinquencies rose 7%.

The decline in direct debit usage among newer customers and increased cash withdrawals are classic indicators of financial distress. With only 44% of customers using automatic payments, the risk of further delinquency growth is elevated. The combination of higher balances and rising missed payments suggests a deteriorating credit environment that could impact bank profitability and potentially lead to tighter lending standards.

Spending rises and payments to balance fall pushing balances upwards as missed payments significantly higher year on year

LONDON--(BUSINESS WIRE)-- The FICO UK Credit Card Market Report for August 2024 shows that while spending and payments to balance followed seasonal trends, missed payments are significantly higher in 2024 than the same period in 2023. Lenders who want to demonstrate clear alignment with Consumer Duty may want to encourage cardholders to adopt direct debit for payments, and implement proactive customer communications where delinquencies occur.

Highlights

• Spending on credit cards increased to £835, 2.3% higher than July 2024
• The percentage of balance paid fell by 3.2% on the previous month and 5.5% on the previous year to 36.6%
• Higher spending and lower payments to balance led to average balances increasing by 1.2% month-on-month and 5.4% year-on-year, to £1,825
• Month-on-month and year-on-year, more customers missed one and two payments, although the number of cardholders who missed three payments fell by 2% month-on-month
• Only 44% of customers currently pay by direct debit, with the number of newer customers using direct debit declining
• 1.3% more cardholders used credit cards to withdraw cash in August than July 2024, but this remained 4.2% lower than in August 2023

FICO Comment

August generally sees an uptick in credit card spending and a drop in payments to balance, and August 2024 was no exception. Spending rose by 2.3% on the previous month, with payments to balance dropping by 3.2% in the same period. This has inevitably led to credit card balances rising by 1.2% month-on-month, a figure which has already been trending upwards for the past two years.

What will be of more concern to lenders is the percentage of customers missing payments. In July 2024 the percentage of customers missing payments across all three delinquency categories rose. In August, increases continued for customers missing one and two payments. However, there was a decrease of 2% for those missing three payments, albeit year-on-year there is a 7% increase.

Average balances for all categories of delinquency are also higher in 2024 than 2023. Year-on-year average balances have increased by 2.2% for one missed payment, 4.3% for two and 5.3% for those who have missed three payments. Perhaps exacerbating the issue, only 44% of customers pay their balance by direct debit; a percentage that has been declining for newer customers.

Lenders who promote payment by direct debit will help to reduce the number of late payers, and in turn reduce the balance outstanding.

As previously reported, cash usage on cards typically increases between March and September. In August this percentage increased month-on-month by 1.3%, to 3.5%, and is likely to rise again in September. However, when compared to 2023, this is 4.2% lower. With cash usage on cards an important potential warning sign for financial stress, it remains important to monitor this continuing upward trajectory.

Key Trend Indicators – UK Cards August 2024

Metric	Amount	Month-on-Month Change	Year-on-Year Change
Average UK Credit Card Spend	£835	+2.3%	+0.4%
Average Card Balance	£1,825	+1.2%	+5.4%
Percentage of Payments to Balance	36.6%	-3.2%	-5.5%
Accounts with One Missed Payment	1.6%	+3.3%	+8.6%
Accounts with Two Missed Payments	0.3%	+1.8%	+6.6%
Accounts with Three Missed Payments	0.2%	-2%	+7%
Average Credit Limit	£5,730	+0.2%	+2.4%
Average Overlimit Spend	£90	-2.2%	-1.1%
Cash Sales as a % of Total Sales	0.9%	1.2%	-4.5%

Source: FICO

These card performance figures are part of the data shared with subscribers of the FICO® Benchmark Reporting Service. The data sample comes from client reports generated by the FICO^® TRIAD^® Customer Manager solution in use by some 80% of UK card issuers. For more information on these trends, contact FICO.

About FICO

FICO (NYSE: FICO) powers decisions that help people and businesses around the world prosper. Founded in 1956, the company is a pioneer in the use of predictive analytics and data science to improve operational decisions. FICO holds more than 200 US and foreign patents on technologies that increase profitability, customer satisfaction and growth for businesses in financial services, insurance, telecommunications, health care, retail and many other industries. Using FICO solutions, businesses in more than 100 countries do everything from protecting 4 billion payment cards from fraud, to improving financial inclusion, to increasing supply chain resiliency. The FICO® Score, used by 90% of top US lenders, is the standard measure of consumer credit risk in the US and other countries, improving risk management, credit access and transparency. Learn more at www.fico.com.

FICO and TRIAD are registered trademarks of Fair Isaac Corporation in the U.S. and other countries.

View source version on businesswire.com: https://www.businesswire.com/news/home/20241023296717/en/

For further comment on the FICO UK Credit Card activity contact:

FICO UK PR Team

Wendy Harrison/Parm Heer

ficoteam@harrisonsadler.com

0208 977 9132

Source: FICO

FAQ

What was the average UK credit card spend in August 2024 according to FICO?

According to FICO's report, the average UK credit card spend in August 2024 was £835, representing a 2.3% increase from July 2024.

How much did credit card payment-to-balance ratios drop in August 2024?

The payment-to-balance ratio fell by 3.2% month-on-month and 5.5% year-on-year to 36.6%.

What was the average credit card balance in the UK for August 2024?

The average credit card balance in August 2024 was £1,825, showing a 1.2% increase month-on-month and a 5.4% increase year-on-year.

What percentage of UK credit card customers used direct debit payments in August 2024?

Only 44% of UK credit card customers used direct debit for payments, with declining adoption rates among newer customers.