FICO UK Credit Card Market Report: June 2024

Rhea-AI Summary

FICO's UK Credit Card Market Report for June 2024 shows a seasonal uplift in consumer spending, with credit card spending rising 4.2% from May to June, averaging £840. Despite this increase, consumers appear to be managing their credit commitments effectively. Key findings include:

- Average balances increased by 1.1% to £1,800, 5.7% higher than June 2023
- The percentage of balance paid dropped by 2.3% month-on-month to 36.9%
- The number of cardholders missing one payment fell by 6.5% from May to June
- Cash withdrawals using credit cards increased by 3.4% month-on-month

While the data suggests overall caution among consumers, there are concerns about increasing balances for customers missing three payments, now standing at £3,050, 7% higher than last year.

Positive

• Credit card spending rose 4.2% from May to June 2024, indicating increased consumer activity
• The number of cardholders missing one payment fell by 6.5% from May to June, showing improved debt management
• Customers missing two payments decreased for the second consecutive month
• Cash sales as a percentage of total sales are 3.7% lower year-on-year, suggesting better financial management

Negative

• Average credit card balances increased by 5.7% year-on-year to £1,800
• The percentage of balance paid dropped by 2.7% year-on-year to 36.9%
• The number of accounts missing three payments is 2% higher year-on-year
• Average balances for cardholders missing three payments rose 7% year-on-year to £3,050

Insights

Financial Analyst

The FICO UK Credit Card Market Report for June 2024 presents a mixed financial picture. While the 4.2% month-on-month increase in credit card spending to £840 aligns with seasonal trends, the mere 0.1% year-on-year growth suggests consumer caution amidst economic uncertainties. The 1.1% rise in average balances to £1,800 is noteworthy, especially given the 5.7% year-on-year increase. This, coupled with the 2.3% drop in percentage of balance paid, indicates potential pressure on household finances. However, the decrease in accounts with missed payments is a positive sign of improved credit management. The 2% year-on-year increase in accounts with three missed payments and their 7% higher average balances warrant close monitoring by lenders for potential credit risks.

Market Research Analyst

The FICO report reveals intriguing consumer behavior patterns. The modest year-on-year spending increase, significantly below inflation rates, suggests a cautious consumer sentiment, possibly influenced by pre-election uncertainties. The summer spending uplift, while present, appears muted compared to historical trends. The divergence between one-time and chronic missed payments is noteworthy. The decrease in short-term delinquencies indicates improved financial discipline among most consumers. However, the rise in three-missed payment accounts and their balances signals a growing financial strain for a subset of consumers. The 3.7% year-on-year decrease in cash withdrawals using credit cards is a positive trend, potentially indicating less reliance on high-interest cash advances. These trends collectively suggest a polarization in consumer financial health, with implications for targeted marketing and risk management strategies.

Start of summer uplift in spending evident although consumers also appear to be managing credit commitments positively

LONDON--(BUSINESS WIRE)-- The FICO UK Credit Card Market Report for June 2024 reflects the usual seasonal uplift in consumer spending over the summer months. However, the data also suggests that consumers are managing their credit debt effectively. Whilst May 2024 saw quite significant month-on-month increases in late payments, lenders will be encouraged by the fact these have not carried over into June to the same extent. One area of concern is the increasing trend in balances for customers missing three payments.

Highlights

• Credit card spending rose 4.2% from May to June 2024, now standing at an average of £840 and 0.1% higher than June 2023
• In line with usual seasonal trends, average balances increased by 1.1% in June to £1,800; this is 5.7% higher than June 2023
• The percentage of balance paid dropped by 2.3% month-on-month in June to 36.9%, reflecting the increase in spend and overall balance. It is also 2.7% lower year-on-year, although the pattern of lower payments to balance seen in the early part of 2024 has steadied
• After rising quite significantly from April to May (8.3%), the number of cardholders who missed one payment fell by 6.5% from May to June
• The average balance for cardholders missing one payment has remained higher year-on-year for two years, and was £2,235 in June
• Although there was an increase in May in the number of customers missing one payment, this has not rolled into seeing higher numbers in June missing two payments. In fact, for the second month in a row there has been a decrease in customers missing two payments
• June also saw a significant drop in customers missing three payments; however, this is still 2% higher year-on-year
• The use of credit cards to take out cash has continued to increase, following the typical summer trend. At 3.45%, it is 3.4% higher month-on-month

FICO Comment

Traditionally the summer months see consumer spending increase and the FICO data, which reflects activity across the majority of UK consumer credit card providers, underlines this. However, it is just 0.1% higher year-on-year, which is considerably lower than current inflation figures, and does seem to suggest an overall caution amongst consumers. The recent Barclays data which showed the first drop in spending by their cardholders for three years, also suggests a lack of consumer confidence during the pre-election period. Regardless, as spending increases over the summer months, it is likely that payments to balance will fall, leading to higher average balances and requiring further vigilance from lenders.

A positive approach by cardholders to credit debt management is reflected in the fact that the marked increase in one missed payments seen in May has not rolled over into two missed payments in June. However, vigilance is necessary for the cardholders with longer-term debt, with those missing three payments rising 2% year-on-year. Average balances for three missed payments now stand at £3,050, which is 7% higher than the same time last year, and this will be of considerable concern to lenders.

The use of credit cards to withdraw cash is another important signal of consumer financial management. Whilst in June this rose by 3.4% compared to May, it is 3.7% lower year-on-year.

Key Trend Indicators – UK Cards June 2024

Metric	Amount	Month-on-Month Change	Year-on-Year Change
Average UK Credit Card Spend	£840	+4.2%	+0.1%
Average Card Balance	£1,800	+1.1%	+5.7%
Percentage of Payments to Balance	36.9%	-2.3%	-2.7%
Accounts with One Missed Payment	1.5%	-6.5%	+2.5%
Accounts with Two Missed Payments	0.3%	-0.9%	-1.9%
Accounts with Three Missed Payments	0.2%	-12.9%	+2%
Average Credit Limit	£5,705	+0.3%	+2.3%
Average Overlimit Spend	£85	-3.4%	-3.4%
Cash Sales as a % of Total Sales	0.9%	+2.8%	-3.7%
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/20240821982809/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 June 2024 according to FICO's report?

According to FICO's UK Credit Card Market Report for June 2024, the average UK credit card spend was £840, which was 4.2% higher than May and 0.1% higher than June 2023.

How did the average credit card balance change in June 2024 compared to the previous year?

The average credit card balance in June 2024 was £1,800, which is 5.7% higher than June 2023 and represents a 1.1% increase from May 2024.

What trend did FICO observe in missed payments for UK credit cards in June 2024?

FICO observed that the number of cardholders missing one payment fell by 6.5% from May to June 2024. Additionally, there was a decrease in customers missing two payments, and a significant drop in those missing three payments, although the latter was still 2% higher year-on-year.

How did the use of credit cards for cash withdrawals change in June 2024?

The use of credit cards for cash withdrawals increased by 3.4% from May to June 2024, following the typical summer trend. However, it was 3.7% lower compared to June 2023.