FICO UK Credit Market Report July 2021: Pandemic Savings Mask Picture of Debt

Increased signs of financial pressure as government support reduces and spending opportunities increase, even though percentage of payments to balance…

Increased signs of financial pressure as government support reduces and spending opportunities increase, even though percentage of payments to balance maintains upward trend

LONDON, Sept. 16, 2021 /PRNewswire/ —

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Highlights

  • The percentage of accounts missing payments in July increased 3 percent year on year
  • Cash usage on cards – often a sign of financial stress – continues to slowly increase, up 4.2 percent
  • Card spend falls £3 compared to June 2021 but is second month that is higher than pre-pandemic levels
  • Percentage of payments to balance continues to grow – 5.7 percent – reaching over a two-year high

Global analytics software provider FICO today released its analysis of UK card trends for July 2021, which reveals that there was an uplift in missed payment rates, whilst spend on cards marginally fell. There was also growth in cash usage.   

Missed payment rates see month of growth

The percentage of accounts missing payments in July increased by 3.2 percent. Their associated balance as a percentage of total balance also increased by 3 percent.

The increase in the percentage of accounts and their balance missing one payment in May has resulted in an uplift in accounts missing three consecutive payments in July — up 19 percent.

July also saw:

  • A 7 percent increase in the percentage of card holders missing one payment
  • An uplift in average balances on accounts missing one or two payments
  • Balances for card holders missing two payments are £215 or 9.5 percent higher than July 2019

However, in July consumers able to make payments increased the percentage of payment to total balance by 5.7 percent compared to the previous month, to yet another over two-year high. It is 22 percent above pre-pandemic levels in July 2019. This suggests that extra lockdown savings continue to influence payment trends.

The coming months will show if there is a trend emerging and more consumers who were able to maintain minimum payments are facing further financial struggles.

Cash usage continues to slowly grow

The percentage of consumers using cash on their credit cards also continues to grow – in July by 4.2 per cent. Consumers moving to using cash, with little or no previous cash usage, could be showing signs of financial issues. But it is still well below pre-pandemic levels and with the contactless limit increasing mid-October from £45 to £100, cash usage may not return to the higher levels seen pre-COVID19.

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 percent of UK card issuers. Issuers wishing to subscribe to this service can contact staceywest@fico.com.

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