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Spending rises and payments to balance fall pushing balances upwards as missed payments significantly higher year on year

The FICO UK Credit Card Market Report for August 2024 shows that while spending and payments to balance followed seasonal trends, missed payments are significantly higher in 2024 than the same period in 2023. Lenders who want to demonstrate clear alignment with Consumer Duty may want to encourage cardholders to adopt direct debit for payments, and implement proactive customer communications where delinquencies occur.

Highlights

• Spending on credit cards increased to £835, 2.3% higher than July 2024
• The percentage of balance paid fell by 3.2% on the previous month and 5.5% on the previous year to 36.6%
• Higher spending and lower payments to balance led to average balances increasing by 1.2% month-on-month and 5.4% year-on-year, to £1,825
• Month-on-month and year-on-year, more customers missed one and two payments, although the number of cardholders who missed three payments fell by 2% month-on-month
• Only 44% of customers currently pay by direct debit, with the number of newer customers using direct debit declining
• 1.3% more cardholders used credit cards to withdraw cash in August than July 2024, but this remained 4.2% lower than in August 2023

FICO Comment

August generally sees an uptick in credit card spending and a drop in payments to balance, and August 2024 was no exception. Spending rose by 2.3% on the previous month, with payments to balance dropping by 3.2% in the same period. This has inevitably led to credit card balances rising by 1.2% month-on-month, a figure which has already been trending upwards for the past two years.

What will be of more concern to lenders is the percentage of customers missing payments. In July 2024 the percentage of customers missing payments across all three delinquency categories rose. In August, increases continued for customers missing one and two payments. However, there was a decrease of 2% for those missing three payments, albeit year-on-year there is a 7% increase.

Average balances for all categories of delinquency are also higher in 2024 than 2023. Year-on-year average balances have increased by 2.2% for one missed payment, 4.3% for two and 5.3% for those who have missed three payments. Perhaps exacerbating the issue, only 44% of customers pay their balance by direct debit; a percentage that has been declining for newer customers.

Lenders who promote payment by direct debit will help to reduce the number of late payers, and in turn reduce the balance outstanding.

As previously reported, cash usage on cards typically increases between March and September. In August this percentage increased month-on-month by 1.3%, to 3.5%, and is likely to rise again in September. However, when compared to 2023, this is 4.2% lower. With cash usage on cards an important potential warning sign for financial stress, it remains important to monitor this continuing upward trajectory.

Key Trend Indicators – UK Cards August 2024

Amount

Month-on-Month Change

Year-on-Year Change

£835

+2.3%

+0.4%

Average Card Balance

£1,825

+1.2%

+5.4%

Percentage of Payments to Balance

36.6%

-3.2%

-5.5%

Accounts with One Missed Payment

1.6%

+3.3%

+8.6%

Accounts with Two Missed Payments

0.3%

+1.8%

+6.6%

Accounts with Three Missed Payments

0.2%

-2%

+7%

Average Credit Limit

£5,730

+0.2%

+2.4%

Average Overlimit Spend

£90

-2.2%

-1.1%

Cash Sales as a % of Total Sales

0.9%

1.2%

-4.5%

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

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