FICO UK Credit Market Report May 2021: Markedly Lower Year-On-Year Increase in Credit Card Spend Suggests Consumers Are Adjusting to 'New Normal'

Rhea-AI Summary

FICO released its analysis of UK card trends for May 2021, indicating consumers are adjusting to new financial realities. Card spending rose by only 4% compared to April's 12% growth, reflecting caution among consumers anticipating the end of furlough support. Payments to balance increased by 10% month-on-month, reaching a two-year high of 36%. Average credit card spending rose to £651, but growth was less than expected. The report highlights an 8% year-on-year increase in average balances for accounts with three missed payments, raising concerns for lenders.

Positive

• Average credit card spending increased to £651 in May.
• Payments to balance rose by 10% month-on-month to 36%, the highest in two years.

Negative

• Card spending growth slowed to 4% from April's 12%, indicating consumer caution.
• 8% year-on-year increase in average balances for accounts with three missed payments raises concerns.

LONDON, July 26, 2021 /PRNewswire/ -- Global analytics software provider FICO today released its analysis of UK card trends for May 2021, which suggests that some consumers are practicing pragmatic financial management, as well as continuing to make use of savings accrued during the pandemic. There are, however, warning signs of the financial pressure growing for those already in debt.

Whilst the effects of a full month of retail and hospitality re-openings were reflected in a further rise in card spend, the increase was just 4 percent compared to the 12 percent increase seen in April. This suggests that consumers foresee future pressure on income with the prospect of furlough support and payment holidays ending.

The percentage of payments to balance continued to increase — by 10 percent month on month. However, an 8 percent year-on-year increase in the average balance for accounts with three missed payments and a growth in the use of cash on cards – 6 percent – will ring warning bells for lenders.

The average spend on UK credit cards increased for the third consecutive month, by £26 to £651 in May 2021. However, the monthly increase may not be as high as some might have been expecting for the first full month of the easing of lockdown restrictions, especially compared to the growth seen in April.

Some consumers receiving furlough payments may be showing caution relating to their spending levels, ahead of the planned scaling down of the government contribution as of 1^st July. This caution could also be the reason that the percentage of payments to balance continued to increase — by 10 percent month on month to 36 percent, the highest ratio over the last two years.

Accounts missing one payment are £25 lower than a year ago. For accounts missing two payments, the average balances are £39 or 2 percent lower year on year, however, this was the peak month during the early stages of the pandemic, so this is not surprising.  Average balances on accounts with three missed payments are £221 higher (8 percent) and four missed payments plus are £228 higher (8 percent).

These card performance figures are part of the data shared with subscribers of the FICO® Benchmark Reporting Service.

About FICO
FICO (NYSE: FICO) powers decisions that help people and businesses around the world prosper. Founded in 1956 and based in Silicon Valley, the company is a pioneer in the use of predictive analytics and data science to improve operational decisions.

Learn more at https://www.fico.com

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

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SOURCE FICO

FAQ

What does the FICO UK card trends report for May 2021 indicate?

It indicates a cautious approach among consumers, with card spending growth slowing to 4% and increased payments to balance.

How much did average credit card spending increase in May 2021?

Average credit card spending increased by £26, reaching £651 in May 2021.

What were the concerns raised in the FICO report regarding consumer debt?

The report highlighted an 8% year-on-year increase in balances for accounts with three missed payments, suggesting growing financial strain.