UK Credit Card Trends 2023-24: FICO Data Shows Rising Spend and Missed Payments

LONDON--(BUSINESS WIRE)--Jul 1, 2024--

The last year has been challenging for UK households balancing budgets against rising fuel costs, spiralling inflation and wage pressures. Analysis by global analytics software firm FICO of its proprietary UK credit cards data for March 2023 to March 2024 illustrates the impact these pressures have had on credit card usage and debt management.

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Overall, consumer spend was up and payments to balance down year-on-year with credit card balances remaining high, having returned to pre-pandemic levels. The 12-month period also saw greater use of credit cards to withdraw cash.

Highlights

FICO Guidance

With customers paying down less of their balances, more customers will fall into the persistent debt category (over a period of 18 months, a customer pays more in interest, fees and charges than they have repaid of the principal). In a Consumer Duty world, FICO recommends that firms are actively identifying these customers at an early stage and reviewing their communications, to encourage higher payments in support of achieving better value from their credit card. This review should be comprehensive and include payment and communications channels which best engage and empower the customer to manage their finances proactively reaching out to customers before they move into each of the persistent debt stages will help to ensure they are on the right product based on their current affordability needs.

With more customers missing payments compared to this time last year, FICO also recommends implementing pre-delinquent strategies and reviewing those already in production to try and reduce the number and amount of balances moving forwards into delinquency. These strategies will support firms in both their attempts to avoid foreseeable customer harm and also carrying potentially avoidable loss provisions, under IFRS 9.

Data and Analysis

Spending has remained high as payments to balance has trended down

Continued high inflation and higher prices for goods has kept spending high throughout the past 12 months. Seasonal fluctuations have continued as expected, and the level of spending has remained steadfastly higher than 2022-23.

The percentage of payments being made compared to overall balances has been trending down since July 2023 – except for the expected seasonal increase in January 2024. With lockdown and increased savings this reached a high of 42% in May 2022, however it has now fallen to 36.4%. With higher spending and lower repayments, it follows that overall card balances have remained higher than the previous year. Having fallen during the pandemic, balances have now returned to pre-pandemic levels, reaching a record high of £1,780 in December 2023.

FICO advises:

As spending and balances increase and remain high, risk teams should review the number and amount of credit card limits being offered to ensure they increase in line with these higher balances. Customers going over their credit card limit should also be reviewed for potential limit increase offers.

Missed payments for New, Established and Veteran card holders

The number of customers missing one, two or three payments has been erratic month-on-month throughout 2023-24. And when comparing year-on-year, the proportion of customers missing payments increased almost every month.

The last 12 months has also seen a change in the behaviour of different segments of cardholders most likely to miss payments.

Before the pandemic, the number of customers missing either one, two or three payments was always higher for the New segment, those who have held the card for less than 12 months. This was expected, as this group of customers had recently taken out cards so were more credit hungry and likely to miss payments. This group also contains first-party fraudsters with no intention of repaying balances.

However, post-pandemic, it is the Established group of customers (those who have held the card for between one and five years) who are now more likely to miss payments. Reasons for this include:

For the Veteran segment, customers who have held their card for more than five years, the increase in missed payments is even more apparent. One, two and three missed payment balances have all increased at a higher rate since December 2023. There were also increases in two missed payment balances between March and August 2023, and again between June and October 2023.

FICO advises: To meet Consumer Duty requirements to proactively reach out before customers become overindebted and affordability issues worsen, risk teams should focus on supporting Established customers who are not managing to pay down their balances. More specialised collections treatment may be appropriate, perhaps moving customers onto a different card that more suits their changing risk profile or reviewing their credit card limit. Supporting customers through challenging times now will boost loyalty and keep them as a long-term customer.

Risk teams should focus on supporting Established customers who are not managing to pay down non-promotional balances, and take proactive action before promotional APRs expire — perhaps move them onto a lower rate, which is also a good incentive to try and keep customers loyal to their bank.

Cash withdrawals on credit cards

In August 2023, UK Finance reported that consumers paying for items in cash had risen for the first time in a decade. This increase in cash usage was also reflected in FICO’s benchmarking figures, which saw a steady increase in the percentage of customers using their credit cards to take out cash between March and September 2023. However, this was still significantly lower than pre-pandemic, when an average 6% of customers used credit cards to take out cash compared to 3.7% in September 2023. The trend for more retailers and hospitality businesses to only accept card payments is likely to be a factor in this shift.

Since September 2023, cash withdrawals have dropped back, following a similar trend as witnessed in the previous year which saw a decrease between September 2022 and February 2023 before increasing over the spring and summer months. However, it is worth noting that when comparing 2023-24 to 2022-23, every month has seen more customers using their cards to take out cash than the same month the previous year.

FICO advises:

Analytical teams should review risk models on an annual basis to ensure they still rank-order risk effectively, especially when models segment customers by cash usage. Risk teams should also consider risk-based cash limit strategies, as well as monitoring the number of cash transactions being accepted, even for underlimit customers.

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.

FICO data shows that the number of UK cardholders missing one, two or three payments has been erratic month-on-month throughout 2023-24. When comparing year-on-year, the proportion of customers missing payments increased almost every month. (Graphic: FICO)

FICO data shows that high inflation and higher prices for goods have kept spending high on UK credit cards throughout the past 12 months. Seasonal fluctuations have continued as expected, and the level of spending has remained steadfastly higher than 2022-23. (Graphic: FICO)

FICO data on UK credit cards shows that the percentage of payments being made compared to overall balances has been trending down since July 2023. (Graphic: FICO)

LONDON (AP) — Rishi Sunak has covered thousands of miles in the past few weeks, but he hasn’t outrun the expectation that his time as Britain’s prime minister is in its final hours.

United Kingdom voters will cast ballots in a national election Thursday, passing judgment on Sunak’s 20 months in office, and on the four Conservative prime ministers before him. They are widely expected to do something they have not done since 2005: Elect a Labour Party government.

During a hectic final two days of campaigning that saw him visit a food distribution warehouse, a supermarket, a farm and more, Sunak insisted “the outcome of this election is not a foregone conclusion.”

“People can see that we have turned a corner,” said the Conservative leader, who has been in office since October 2022. “It has been a difficult few years, but undeniably things are in a better place now than they were.”

But even a last-minute pep talk at a Conservative rally Tuesday night by former Prime Minister Boris Johnson — who led the party to a thumping election victory in 2019 — did little to lift the party's mood. Conservative Cabinet minister Mel Stride said Wednesday it looked like Labour was heading for an “extraordinary landslide."

Labour warned against taking the election result for granted, imploring supporters not to grow complacent about polls that have given the party a solid double-digit lead since before the campaign began. Labour leader Keir Starmer has spent the six-week campaign urging voters to take a chance on his center-left party and vote for change. Most people, including analysts and politicians, expect they will.

Labour has not set pulses racing with its pledges to get the sluggish economy growing, invest in infrastructure and make Britain a “clean energy superpower.”

But nothing has really gone wrong, either. The party has won the support of large chunks of the business community and endorsements from traditionally conservative newspapers including the Rupert Murdoch-owned Sunday Times.

Former Labour candidate Douglas Beattie, author of the book “How Labour Wins (and Why it Loses),” said Starmer’s “quiet stability probably chimes with the mood of the country right now.”

“The country is looking for fresh ideas, moving away from a government that’s exhausted and divided,” Beattie said. “So Labour are pushing at an open door.”

The Conservatives, meanwhile, have been plagued by gaffes. The campaign got off to an inauspicious start when rain drenched Sunak as he made the announcement outside 10 Downing St. on May 22. Then on June 6, Sunak went home early from commemorations in France marking the 80th anniversary of the D-Day invasion, missing a ceremony alongside United States President Joe Biden and France’s Emmanuel Macron.

Several Conservatives close to Sunak are being investigated by the gambling regulator over suspicions they used inside information to place bets on the date of the election before it was announced.

It has all made it harder for Sunak to shake off the taint of political chaos and mismanagement that’s gathered around the Conservatives since Johnson and his staff held lockdown-breaching partie s during the COVID-19 pandemic.

Johnson’s successor, Liz Truss, rocked the COVID-weakened economy with a package of drastic tax cuts, making a cost-of-living crisis worse, and lasted just 49 days in office. There is widespread dissatisfaction over a host of issues, from a dysfunctional public health care system to crumbling infrastructure.

But for many voters, the lack of trust applies not just to Conservatives, but to politicians in general. Veteran rouser of the right, Nigel Farage, has leaped into that breach with his Reform U.K. party and grabbed headlines, and voters’ attention, with his anti-immigration rhetoric.

The centrist Liberal Democrats and environmentalist Green Party also want to sweep up disaffected voters from the bigger parties.

Across the country, voters say they want change but aren’t optimistic it will come.

“I don’t know who’s for me as a working person,” said Michelle Bird, a port worker in Southampton on England’s south coast who was undecided about whether to vote Labour or Conservative. “I don’t know whether it’s the devil you know or the devil you don’t.”

Conner Filsell, a young office worker in the London suburbs, would like a roof of his own.

“I still live at home. I would love to be able to have my own place, but the way things are going it’s just not on the cards,” he said.

Lise Butler, senior lecturer in modern history at City University of London, said that signs point to this being “a change election in which the Conservatives are punished.” But she said that if Starmer wins, “the years to come … may be challenging.”

“He’ll probably be facing constant attacks on various grounds from left and right,” she said. “So I think that while the outcome of this election is pretty clear, I think all bets are off in terms of what, what Labour’s support is going to look like over the next few years.”

Starmer has agreed that his biggest challenge is “the mindset in some voters that everything’s broken, nothing can be fixed.”

“And secondly, a sense of mistrust in politics because of so many promises having been made over the last 14 years which weren’t carried through,” he told broadcaster ITV on Tuesday. “We have to reach in and turn that around.”

Many election experts expect a low turnout, below the 67% recorded in 2019. Yet this election may bring a scale of change Britain has not seen for decades if it delivers a big Labour majority and a diminished Conservative Party.

In Moreton-in-Marsh, a pretty town of honey-colored stone buildings in western England’s Cotswold hills, 25-year-old Evie Smith-Lomas relished the chance to eject the area’s longstanding Conservative lawmaker.

“This has been a Tory seat forever, for 32 years, longer than I’ve been alive,” she said. “I’m excited at the prospect of someone new. I mean I think 32 years in any job is too long. You surely have run out of ideas by now.”

Associated Press video journalist Tian Macleod Ji in Moreton-in-Marsh, England, contributed to this report.

Former Prime Minister of the United Kingdom, Boris Johnson, delivers a speech at a Conservative Party campaign event at the National Army Museum in London., Tuesday, July 2, 2024. (AP Photo/Thomas Krych)

Former Prime Minister of the United Kingdom, Boris Johnson, delivers a speech at a Conservative Party campaign event at the National Army Museum in London., Tuesday, July 2, 2024. (AP Photo/Thomas Krych)

Britain's Prime Minister and Conservative Party leader, Rishi Sunak, delivers a speech at a Conservative Party campaign event at the National Army Museum in London., Tuesday, July 2, 2024. (AP Photo/Thomas Krych)

FILE - A sign points to where residents can cast their votes in London, Friday, May 3, 2024. U.K. voters are set to cast ballots in a national election on July 4, passing judgment on 14 years of Conservative rule. They are widely expected to do something they have not done since 2005 — elect a Labour Party government. (AP Photo/Kin Cheung, File)

FILE - British Prime Minister Rishi Sunak and opposition Labour Party leader Keir Starmer, left, take part in a BBC debate, in Nottingham, England, Wednesday June 26, 2024. U.K. voters are set to cast ballots in a national election on July 4, passing judgment on 14 years of Conservative rule. They are widely expected to do something they have not done since 2005 — elect a Labour Party government. (Phil Noble/Pool via AP, File)

FILE - British Prime Minister Rishi Sunak looks on during his visit to a cricket club as he campaigns in Nuneaton, England, Monday July 1, 2024. U.K. voters are set to cast ballots in a national election on July 4, passing judgment on 14 years of Conservative rule. They are widely expected to do something they have not done since 2005 — elect a Labour Party government. (Dan Kitwood/Pool via AP, File)

FILE - Britain's Labour Party leader Keir Starmer speaks on stage at the launch of the party's manifesto in Manchester, England, Thursday, June 13, 2024. U.K. voters are set to cast ballots in a national election on July 4, passing judgment on 14 years of Conservative rule. They are widely expected to do something they have not done since 2005 — elect a Labour Party government. (AP Photo/Jon Super, File)

FILE - A woman holds her voting card as she arrives to vote in London in local elections, Thursday, May 2, 2024. U.K. voters are set to cast ballots in a national election on July 4, passing judgment on 14 years of Conservative rule. They are widely expected to do something they have not done since 2005 — elect a Labour Party government. (AP Photo/Kin Cheung, File)