FICO UK Credit Card Market Report January 2022: Covid Bubble Not Yet Burst by Rising Cost of Living

Rhea-AI Summary

FICO has released its analysis of UK credit card trends for January 2022, revealing a mixed picture amidst rising living costs. Average credit card spend decreased by 11.97% month-on-month to £669, while the payments-to-balance ratio increased by 3.85% to 41.5%. Despite a rise in missed payments, particularly among accounts with two missed payments (up 12%), they remain lower than January 2021 levels. FICO highlights that consumers are utilizing pandemic savings for credit management, but warns lenders to monitor missed payments as inflation rises.

Positive

• Payments-to-balance ratio increased to 41.5%, indicating better credit management.
• Average credit card spend year-on-year rose by 17.37%, suggesting recovery.
• Average credit limit increased to £5,450, up 2.27% year-on-year.

Negative

• Average credit card spend down by 11.97% month-on-month.
• Percentage of accounts with two missed payments increased by 12% compared to December.
• Missed payments may indicate financial stress as living costs rise.

LONDON--(BUSINESS WIRE)-- Global analytics software provider FICO today released its analysis of UK card trends for January 2022, which suggest that despite well-documented increases in the cost of living, consumers are still managing their credit card spend relatively well. The analysis comes as Chancellor Rishi Sunak prepares to deliver his spring statement on Wednesday. He has previously said he would put in place policies that help families meet the cost of living crisis, such as freezing duties, cutting the tax rate in universal credit, and increasing the national living wage. Business leaders are, however, calling for a delay to the 1.25 percent national insurance increase set out in the autumn budget.

Highlights

• Card spend and average active balance follow a typical January pattern of decline compared to December
• But atypically for January, the percentage of payments to balance ratio shows a marginal increase month-on-month
• Potential signs of financial stress are seen through the percentage of accounts that have two missed payments increasing 12 percent compared to December, although remaining lower than January 2021

Key Trend Indicators

Metric	Amount	Month-on-Month Change	Year-on-Year Change
Average UK Credit Card Spend	£669	-11.97%	+17.37
Average Card Balance	£1,512	-2.43%	+0.42%
Percentage of Payments to Balance	41.5%	+3.85	+17%
Accounts with One Missed Payment	1.54%	+0.72%	+3.62%
Accounts with Two Missed Payments	0.3%	+11.83%	-11.16%
Accounts with Three Missed Payments	+0.17%	+3.46%	-19.33%
Average Credit Limit	£5,450	+.028%	+2.27%
Average Overlimit Spend	£121	0.0%	-18.79%
Cash Sales / Total Sales	1.36%	+10.42%	-5.83%

FICO Comment

The new data for January 2022 illustrates the continued mixed picture of consumer financial management. Having seen the percentage of accounts paying their full balance start to drop in December, it was anticipated this pattern – and other signs of financial stress - would be evident in January, particularly in response to rapidly rising inflation. However, the FICO data actually suggests continued strong financial management. Month-on-month and year-on-year there were increases in the proportion consumers paid of their credit card balances, suggesting continued use of pandemic savings. This also suggests that consumers want to continue to have credit available for future spending.

Of some concern to lenders – although usually expected after Christmas – is the month-on-month increase in card holders missing payments, in particular those falling two months behind. Whilst the percentage of accounts with two missed payments is lower than January 2021, the impact of pandemic savings this time last year as well as supressed spending due to the lockdown may have been influential.

The FICO data suggests that credit cardholders with lockdown savings are continuing to use these to pay off credit card balances. The question is whether this resilience can be sustained as the cost of living generally and utility and petrol prices in particular continue to escalate. Lenders will need to be vigilant to any further increases in missed payments in the coming months and ensure that they are offering support to customers where it’s needed.

These card performance figures are part of the data shared with subscribers of the FICO® Benchmark Reporting Service produced by FICO® Advisors, the business consulting arm of FICO®. The data sample comes from client reports generated by the FICO® TRIAD® Customer Manager solution in use by some 80 percent of UK card issuers.

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, telecommunications, health care, retail and many other industries. Using FICO solutions, businesses in more than 120 countries do everything from protecting 2.6 billion payment cards from fraud, to helping people get credit, to ensuring that millions of airplanes and rental cars are in the right place at the right time.

Learn more at https://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/20220321005084/en/

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

FICO UK PR Team

Wendy Harrison/Parm Heer/Matthew Enderby

ficoteam@harrisonsadler.com

0208 977 9132

Source: FICO

FAQ

What are the key findings from FICO's January 2022 credit card analysis?

FICO's analysis indicates a decrease in average credit card spend and an increase in the payments-to-balance ratio, while missed payments have risen.

How much did average credit card spend change in January 2022 according to FICO?

Average credit card spend in January 2022 decreased by 11.97% month-on-month to £669.

What concerns did FICO raise regarding consumer payments in January 2022?

FICO noted an increase in accounts with missed payments, particularly those with two missed payments, raising concerns about potential financial stress.

What does FICO suggest regarding consumer credit management in January 2022?

FICO suggests that consumers are still effectively managing their credit by using pandemic savings to pay off balances, despite rising costs.

How did the average credit limit change according to FICO's report for January 2022?

The average credit limit rose to £5,450, marking a 2.27% increase year-on-year.