FICO UK Credit Card Market Report: July 2024
Spending falls following typical seasonal patterns, although average balance is up
Highlights
-
Spending on credit cards dropped by
2.7% month-on-month and1.2% year-on-year, to£815 -
July saw a
2.3% month-on-month increase in the percentage of balances paid, to37.8% -
The number of customers missing payments across one, two and three months increased in July; a
2.3% increase for two missed payments was particularly surprising after the6.5% drop in June for those missing one payment -
The average balance for consumers missing one payment increased by
0.3% on the previous month and4.4% in 2023; the average balance for customers missing two payments decreased by0.3% month-on-month but remains4.7% higher than the previous year -
In July,
3.46% of customers took out cash on their card, equating to a0.5% increase in the previous month but an annual drop of4.8%
FICO Comment
While spend dropped by
Of potential concern for risk managers will be the fluctuating pattern of missed payments. With the number of customers missing payments increasing month-on-month across all cycles and steadily trending up over the last two years, issuers should consider pre-collections treatments such as sending out payment reminders, offering more flexible payment options and utilising more customer preferred communication methods, supported by self-service channels.
Established customers (who have held their credit card for between one and five years) have the highest percentage of missed payments. Many customers in this group will have taken out cards during the pandemic, when their affordability may have been inflated due to lack of spending opportunities. They may also have taken on promotional offers such as balance transfers; as these offers expire, they may now be struggling to pay off higher APRs.
In line with Consumer Duty, financial institutions should review affordability metrics for customers coming to the end of promotional offers and move them onto rates more suited to their affordability profile, rather than taking a “one size fits all” approach.
The average balances for customers missing one, two and three payments have been trending up over the last two years. However, the overall average credit card balance has also been increasing and the ratio of delinquent balance to overall balance remains flat, indicating that balances for those customers missing payments is not increasing at a faster rate than for the overall balance.
Cash usage tends to increase over the summer months and this pattern is evident for July with
Key Trend Indicators –
Metric |
Amount |
Month-on-Month Change |
Year-on-Year Change |
Average |
|
- |
- |
Average Card Balance |
|
|
+ |
Percentage of Payments to Balance |
|
+ |
- |
Accounts with One Missed Payment |
|
+ |
- |
Accounts with Two Missed Payments |
|
+ |
+ |
Accounts with Three Missed Payments |
|
+ |
+ |
Average Credit Limit |
|
+ |
+ |
Average Overlimit Spend |
|
+ |
- |
Cash Sales as a % of Total Sales |
|
- |
- |
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
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For further comment on the FICO
FICO
Wendy Harrison/Parm Heer
ficoteam@harrisonsadler.com
0208 977 9132
Source: FICO