FICO UK Credit Card Market Report: May 2024

Rhea-AI Summary

The FICO UK Credit Card Market Report for May 2024 reveals typical seasonal patterns in spending and balance management, but with signs of financial stress. Credit card spending decreased by 2.9% from April to May, averaging £805, while average balances fell 0.3% month-on-month but remained 6.3% higher than May 2023. Notably, cardholders missing one payment increased by 8.4% from April to May, and cash withdrawals on credit cards rose by 2.2%, indicating potential financial strain. The report highlights that missed payments have been trending upward since August 2022, with significant year-on-year increases across one, two, and three missed payment categories. Average balances for missed payments remain higher year-on-year, potentially due to inflation.

Positive

• Credit card spending in May 2024 was 0.6% higher than May 2023, showing year-on-year growth
• Average credit limit increased by 0.4% month-on-month and 2.2% year-on-year to £5,690
• Percentage of payments to balance rose 4.3% month-on-month to 37.79%, indicating improved repayment behavior

Negative

• Number of cardholders missing one payment increased by 8.4% from April to May 2024
• Accounts with three missed payments increased by 4.1% month-on-month and 13.1% year-on-year
• Average balance for cardholders missing one payment remained higher year-on-year for over two years, currently at £2,225
• Cash withdrawals on credit cards rose by 2.2% month-on-month, suggesting increased financial stress
• Average card balance was 6.3% higher than May 2023, indicating growing consumer debt

Insights

Financial Analyst

As a financial analyst, I find the FICO UK Credit Card Market Report for May 2024 to be particularly insightful. The report reveals some concerning trends that warrant attention from both investors and industry stakeholders.

One of the most striking findings is the 8.4% increase in cardholders missing one payment from April to May 2024. This surge, coupled with the fact that missed payments have been trending upwards since August 2022, signals potential financial stress among consumers. The 2.5% year-on-year increase in cardholders missing one payment further underscores this trend.

Another red flag is the rise in cash withdrawals on credit cards, with 3.3% of customers engaging in this behavior in May 2024. While this is a 2.6% decrease from May 2023, the month-on-month increase of 2.2% since March is noteworthy. Cash advances on credit cards often indicate financial distress, as they typically incur high fees and interest rates.

The average balance for cardholders missing payments is also concerning. For those missing one payment, the average balance has been higher year-on-year for over two years, currently at £2,225. This persistent elevation suggests that consumers are struggling to manage their debt effectively.

From an investor's perspective, these trends could have implications for credit card issuers and financial institutions. Higher delinquency rates and cash advances may lead to increased credit losses and potentially impact profitability. It's important for investors to monitor how card issuers are managing risk and adjusting their strategies in response to these trends.

While spending and balance patterns are following usual seasonal trends, the underlying indicators of financial stress suggest a need for caution. As we approach the summer months, typically associated with increased spending, it will be essential to watch how these trends evolve and whether they exacerbate the current signs of financial strain among UK consumers.

Market Research Analyst

The FICO UK Credit Card Market Report for May 2024 offers valuable insights into consumer behavior and economic trends. As a market research analyst, I find several points particularly noteworthy for investors and industry watchers.

Firstly, the report shows a divergence between short-term and long-term trends. While credit card spending fell 2.9% month-on-month, it was still 0.6% higher than May 2023. Similarly, average balances decreased 0.3% from April to May but were 6.3% higher year-on-year. This suggests that while there may be some short-term fluctuations, the overall trend points towards increased credit card usage and higher balances.

The seasonal patterns highlighted in the report are important for understanding market dynamics. The expectation of increased spending during the summer months, followed by potentially fewer fully paid balances, indicates a cyclical nature to credit card usage. Investors should factor in these patterns when analyzing quarterly results of financial institutions.

An intriguing data point is the average credit limit, which stood at £5,690, up 2.2% year-on-year. This increase in credit limits, coupled with rising balances, could indicate that card issuers are still confident in consumers' ability to manage debt, despite the signs of financial stress noted elsewhere in the report.

The report also sheds light on consumer segmentation. The varying trends in missed payments (one, two, or three months) and their associated balance levels provide a nuanced view of different consumer groups and their financial health. This granular data is invaluable for targeted marketing strategies and risk management.

Lastly, the cash sales as a percentage of total sales metric, while small at 0.89%, is an important indicator to watch. Its slight increase month-on-month, despite being lower year-on-year, could be an early warning sign of changing consumer behavior if the trend continues.

For investors, these insights can inform decisions related to financial sector investments, consumer discretionary stocks and even broader economic forecasts. The mixed signals in the report suggest a need for careful monitoring of consumer financial health in the coming months.

Spending and balances follow usual patterns although signs of financial stress seen in 8.4% increase in cardholders missing one payment and 2.3% rise in cash withdrawals on credit cards

LONDON--(BUSINESS WIRE)-- The FICO UK Credit Card Market Report for May 2024 shows consumers following the usual annual patterns for spending and managing their credit card balances. Typical of late Spring, the percentage of balances paid rose in May, leading to lower average outstanding balances. Spending also fell. However, if consumers continue to follow seasonal trends, spend is likely to rise in the summer months, potentially leading to fewer balances being fully paid.

Highlights

• Credit card spending fell 2.9% from April to May 2024, now standing at an average of £805, however it was still 0.6% higher than May 2023
• In line with lower spending, average balances were 0.3% lower in May than April, but 6.3% higher than May 2023
• After falling from March to April, the number of cardholders who missed one payment increased by 8.4% from April to May 2024
• The average balance for cardholders missing one payment has remained higher year-on-year for two years, currently standing at £2,225
• The number of consumers withdrawing cash on their credit cards rose by 2.2% month-on-month, to 3.3% in May, another indicator of potential financial stress

FICO Comment

Although inflation remained high, spending fell from April to May. However, as the Summer holiday season approaches, spending is expected to follow the usual pattern and increase over the coming months. As spending increases, it is likely that payments to balance will fall, leading to higher average balances and requiring further vigilance from lenders.

Missed payments remain a particular area of interest for lenders, increasing by 8.4% in May, after a drop in April. Overall, this figure has been trending upwards since August 2022.

Some 1.6% of cardholders missed one payment in May, a 2.5% year-on-year increase. Some 0.3% missed two payments, which was a 6.5% increase on May 2023. However, 8.1% fewer cardholders missed two payments than in April, which was to be expected following a drop in those missing one payment in April and therefore not rolling forwards in delinquency.

The percentage of cardholders missing three payments continues to trend up, having increased for three consecutive months. In May 2024, there was a 4.1% increase on the previous month, to 0.2%, which represents a significant year-on-year increase of 13.1%.

With missed payments rising, the average missed payment balances for one, two and three month levels remain higher year-on-year. For cardholders who have missed one payment, the average balance has now been higher year-on-year for more than two years, currently standing at £2,225. The average balance for customers missing two or three payments has been higher year-on-year since August 2023, standing at £2,685 and £3,030 respectively. These rises may be due in part to inflation.

The other indicator of financial stress is cash withdrawals on credit cards. Since March, cardholders have been increasingly withdrawing cash on their credit cards, with 3.3% of customers doing so in May 2024, a 2.2% month-on-month increase. However, the rate does remain 2.6% lower than May 2023.

Key Trend Indicators – UK Cards May 2024

Metric	Amount	Month-on-Month Change	Year-on-Year Change
Average UK Credit Card Spend	£805	-2.9%	+0.6%
Average Card Balance	£1,780	-0.3%	+6.3%
Percentage of Payments to Balance	37.79%	+4.3%	-4.2%
Accounts with One Missed Payment	1.6%	+8.4%	+2.5%
Accounts with Two Missed Payments	0.3%	-8.1%	+6.5%
Accounts with Three Missed Payments	0.2%	+4.1%	+13.1%
Average Credit Limit	£5,690	+0.4%	+2.2%
Average Overlimit Spend	£90	+3.5%	-4.3%
Cash Sales as a % of Total Sales	0.89%	+2.2%	-2.6%

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.

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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 May 2024?

The average UK credit card spend in May 2024 was £805, which was 2.9% lower than April but 0.6% higher than May 2023.

How did missed payments change in the UK credit card market in May 2024?

In May 2024, cardholders missing one payment increased by 8.4% from April, while those missing three payments rose by 4.1% month-on-month and 13.1% year-on-year.

What was the trend in cash withdrawals on credit cards in May 2024?

Cash withdrawals on credit cards increased by 2.2% month-on-month in May 2024, with 3.3% of customers using this feature, indicating potential financial stress.

How did average credit card balances change in May 2024 according to FICO?

Average credit card balances decreased by 0.3% from April to May 2024, but were 6.3% higher than May 2023, standing at an average of £1,780.