Consumers are becoming increasingly careful with their spending and are losing confidence, according to the latest data from analytics firm, FICO, which has published its ‘UK Credit Card Market Report’ for June 2024.
The FICO report outlines the continuation of a usual trend for June: a seasonal uplift in consumer spending during the summer months. Credit card spending rose 4.2 per cent from May to June 2024, now standing at an average of £840. However, spending was just 0.1 per cent higher than in June 2023, considerably lower than current inflation figures, suggesting an overall caution amongst consumers.
But as more consumers spent more of their money, fewer were guilty of late payments. May 2024 saw a significant month-on-month increase in late payments, but it appears consumers were more focused on managing their credit debt the following month. In fact, for the second month in a row, there was a decrease in customers missing two payments.
June also saw a significant drop in customers missing three payments; however, this is still two per cent higher year-on-year.
After rising quite significantly from April to May (8.3 per cent), the number of cardholders who missed one payment fell by 6.5 per cent 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.
The use of credit cards to take out cash has continued to increase, following the typical summer trend. At 3.45 per cent, it is 3.4 per cent higher month-on-month. This appears to signal enhanced levels of consumer financial management.
Positives and negatives for cardholders and lenders alike
Recent Barclays data showed the first drop in spending by their cardholders for three years, suggesting 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.
FICO also said that a positive approach by cardholders to credit debt management is reflected in the fact that the marked increase in one missed payment seen in May has not rolled over into two missed payments in June. However, vigilance is necessary for cardholders with longer-term debt, with those missing three payments rising two per cent year-on-year.
Average balances for three missed payments now stand at £3,050, which is seven per cent higher than the same time last year, and this will be of considerable concern to lenders.
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