FICO analysis of UK credit card trends in 2023-24
FICO’s analysis of credit card trends from March 2023 to March 2024 reveals shifts in consumer behaviour, influenced by economic pressures. Even though inflation is rising and costs increase, consumer spending remained high throughout the analysed period. This sustained spending trend was accompanied by a decrease in payments made towards credit card balances, showcasing a challenge in debt management.
These developments highlight a concerning trend towards persistent debt among credit card users. With fewer customers paying down their balances, many risk falling into prolonged debt cycles where interest and fees outweigh principal repayments. FICO recommends that financial firms proactively identify and support these customers early on to promote better financial outcomes.
Spending remains high while payment to balances trend down
Throughout the observed period, the average level of spending per credit card remained high compared to previous years. Seasonal fluctuations developed over predictable patterns, with January 2024 showing a slight increase in payments, likely due to post-holiday repayments. However, overall, the proportion of payments relative to total balances declined steadily from July 2023, reaching 36.4% by the end of the period.
Credit card balances, which had decreased during the pandemic, rebounded to pre-pandemic levels by December 2023, topping at GBP 1,780. This resurgence underscores the financial strain faced by consumers as they cope with increased living costs and ongoing economic uncertainties.
Payment behaviours for established and veteran cardholders
The analysis of missed payments shows shifting patterns among different segments of credit card holders. Traditionally, new cardholders were the one who had higher rates of missed payments due to credit acquisition and potential fraud. However, post-pandemic trends indicate that established cardholders, particularly those holding cards for one to five years, also exhibit higher rates of missed payments, possibly due to expiring promotional offers and increased interest rates.
Credit cards increasingly used for cash withdrawals
The use of credit cards for cash withdrawals also fluctuated throughout the year, affected by broader economic conditions and changes in consumer spending habits. Although cash withdrawals declined after a peak in mid-2023, the overall trend showed an increase compared to pre-pandemic levels, reflecting a change in preferences and payment behaviours.
FICO’s comprehensive analysis provides insights into how economic conditions and consumer behaviours have shaped UK credit card trends from 2023 to 2024. By highlighting the challenges of persistent debt, evolving payment patterns, and the impact of economic factors on consumer finance, FICO aims to provide a detailed picture of the financial landscape so that finance teams can adapt their strategies to better serve their customers and mitigate risks.
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