FICO UK Credit Card Market Report: August 2024
Wednesday, Oct 23, 2024 4:11 am ET
1min read The FICO UK Credit Card Market Report for August 2024 provides valuable insights into the current state of the UK credit card market, highlighting trends and potential risks. As the summer holiday season approaches, spending is expected to increase, leading to higher average balances and requiring lenders to remain vigilant.
Spending and balances follow usual patterns, although signs of financial stress are apparent. Credit card spending fell 2.9% from April to May 2024, standing at an average of £805, but it was still 0.6% higher than May 2023. In line with lower spending, average balances were 0.3% lower in May than April, but 6.3% higher than May 2023.
Missed payments remain a particular area of interest for lenders, increasing by 8.4% in May, after a drop in April. Some 1.6% of cardholders missed one payment in May, a 2.5% year-on-year increase. The percentage of cardholders missing two payments also increased by 6.5% year-on-year, while those missing three payments trended up for three consecutive months, with a 4.1% increase in May.
Cash withdrawals on credit cards, another indicator of financial stress, rose by 2.2% month-on-month to 3.3% in May. However, the rate remains 2.6% lower than May 2023.
To mitigate the risks associated with rising missed payments and cash withdrawals, lenders should consider implementing the following strategies:
1. Enhance credit risk management: Lenders should closely monitor credit card accounts and adjust credit limits as needed to manage risk effectively.
2. Promote financial education: Lenders can offer resources and tools to help consumers better understand their credit card usage and manage their finances responsibly.
3. Encourage responsible borrowing: Lenders should communicate the importance of making timely payments and avoiding excessive cash withdrawals on credit cards.
As the UK credit card market continues to evolve, lenders must remain proactive in addressing potential risks and supporting consumers in managing their credit card accounts responsibly. By staying informed and implementing effective strategies, lenders can help ensure the stability and growth of the UK credit card market.
Spending and balances follow usual patterns, although signs of financial stress are apparent. Credit card spending fell 2.9% from April to May 2024, standing at an average of £805, but it was still 0.6% higher than May 2023. In line with lower spending, average balances were 0.3% lower in May than April, but 6.3% higher than May 2023.
Missed payments remain a particular area of interest for lenders, increasing by 8.4% in May, after a drop in April. Some 1.6% of cardholders missed one payment in May, a 2.5% year-on-year increase. The percentage of cardholders missing two payments also increased by 6.5% year-on-year, while those missing three payments trended up for three consecutive months, with a 4.1% increase in May.
Cash withdrawals on credit cards, another indicator of financial stress, rose by 2.2% month-on-month to 3.3% in May. However, the rate remains 2.6% lower than May 2023.
To mitigate the risks associated with rising missed payments and cash withdrawals, lenders should consider implementing the following strategies:
1. Enhance credit risk management: Lenders should closely monitor credit card accounts and adjust credit limits as needed to manage risk effectively.
2. Promote financial education: Lenders can offer resources and tools to help consumers better understand their credit card usage and manage their finances responsibly.
3. Encourage responsible borrowing: Lenders should communicate the importance of making timely payments and avoiding excessive cash withdrawals on credit cards.
As the UK credit card market continues to evolve, lenders must remain proactive in addressing potential risks and supporting consumers in managing their credit card accounts responsibly. By staying informed and implementing effective strategies, lenders can help ensure the stability and growth of the UK credit card market.
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