FICO UK Credit Card Market Report January 2022: Covid Bubble Not Yet Burst by Rising Cost of Living

LONDON--(BUSINESS WIRE)-- Global analytics software provider FICO today released its analysis of UK card trends for January 2022, which suggest that despite well-documented increases in the cost of living, consumers are still managing their credit card spend relatively well. The analysis comes as Chancellor Rishi Sunak prepares to deliver his spring statement on Wednesday. He has previously said he would put in place policies that help families meet the cost of living crisis, such as freezing duties, cutting the tax rate in universal credit, and increasing the national living wage. Business leaders are, however, calling for a delay to the 1.25 percent national insurance increase set out in the autumn budget.

Highlights

• Card spend and average active balance follow a typical January pattern of decline compared to December
• But atypically for January, the percentage of payments to balance ratio shows a marginal increase month-on-month
• Potential signs of financial stress are seen through the percentage of accounts that have two missed payments increasing 12 percent compared to December, although remaining lower than January 2021

Key Trend Indicators

Metric	Amount	Month-on-Month Change	Year-on-Year Change
Average UK Credit Card Spend	£669	-11.97%	+17.37
Average Card Balance	£1,512	-2.43%	+0.42%
Percentage of Payments to Balance	41.5%	+3.85	+17%
Accounts with One Missed Payment	1.54%	+0.72%	+3.62%
Accounts with Two Missed Payments	0.3%	+11.83%	-11.16%
Accounts with Three Missed Payments	+0.17%	+3.46%	-19.33%
Average Credit Limit	£5,450	+.028%	+2.27%
Average Overlimit Spend	£121	0.0%	-18.79%
Cash Sales / Total Sales	1.36%	+10.42%	-5.83%

FICO Comment

The new data for January 2022 illustrates the continued mixed picture of consumer financial management. Having seen the percentage of accounts paying their full balance start to drop in December, it was anticipated this pattern – and other signs of financial stress - would be evident in January, particularly in response to rapidly rising inflation. However, the FICO data actually suggests continued strong financial management. Month-on-month and year-on-year there were increases in the proportion consumers paid of their credit card balances, suggesting continued use of pandemic savings. This also suggests that consumers want to continue to have credit available for future spending.

Of some concern to lenders – although usually expected after Christmas – is the month-on-month increase in card holders missing payments, in particular those falling two months behind. Whilst the percentage of accounts with two missed payments is lower than January 2021, the impact of pandemic savings this time last year as well as supressed spending due to the lockdown may have been influential.

The FICO data suggests that credit cardholders with lockdown savings are continuing to use these to pay off credit card balances. The question is whether this resilience can be sustained as the cost of living generally and utility and petrol prices in particular continue to escalate. Lenders will need to be vigilant to any further increases in missed payments in the coming months and ensure that they are offering support to customers where it’s needed.

These card performance figures are part of the data shared with subscribers of the FICO® Benchmark Reporting Service produced by FICO® Advisors, the business consulting arm of FICO®. The data sample comes from client reports generated by the FICO® TRIAD® Customer Manager solution in use by some 80 percent of UK card issuers.

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, telecommunications, health care, retail and many other industries. Using FICO solutions, businesses in more than 120 countries do everything from protecting 2.6 billion payment cards from fraud, to helping people get credit, to ensuring that millions of airplanes and rental cars are in the right place at the right time.

Learn more at https://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/Matthew Enderby

ficoteam@harrisonsadler.com

0208 977 9132

Source: FICO