FICO’s latest report reveals a rise in credit card spending and a 5.8% decrease in cash sales compared to the previous year.
The analytics software provider FICO has released its “FICO UK Credit Card Market Report for September 2023,” which shows that while credit card spending has increased over the previous year, cash sales have decreased by 5.8% during the same period.
The FICO TRIAD customer management system generates client reports, which are the source of the research. The average amount spent on credit cards in September 2023 was £805, which was £30 more than in September 2022 and over £100 (£95) more than in September 2021.
“After a yo-yo summer of consumer spending and credit card management, September 2023 saw the average spend on credit cards fall slightly, albeit it remains higher than the previous year,” FICO noted in a statement regarding the data. Spending in November and December is expected to increase due to the approaching holiday season and advertisers’ increased spending drive, but it’s unclear how much given the other well-documented financial challenges that consumers are facing.
Use caution
Over the last 24 months, December’s credit card spending has exceeded September’s by £50. If the current year and the following year exhibit the same pattern, people may use credit cards to spend, on average, £900 in December 2024.
But lenders need to exercise caution. The percentage of accounts that are missing one, two, or three payments has increased by 9.3%, 10.7%, and 17.9% annually, respectively. In September 2023, there was a noticeable rise in the number of missed payments compared to August of the same year, with a 13.5% increase.
“For those customers missing two payments, the average balance has been trending upward over the last few months, but it has decreased marginally by 0.6% month-over-month at £2,605,” FICO continued.
Increasing credit card amounts
The analytics software provider added, “There has been a slight monthly increase in average credit card balances driven by the increase in spending.” Additionally, there has been a rise in the quantity of clients who fail to make payments, demonstrating how the continuous fluctuations in the economy still affect consumer expenditure. Because of inflationary pressures and a bleak economic forecast, average balances are probably going to keep rising and will probably stay higher than they were a few months ago.
The average credit card debt actually increased by 8.6% year over year, but it was still relatively constant at £1,735 compared to August. This is in line with the longer-term growing trend.
The percentage of payments to balance reached a peak of 42% in May 2022. Subsequently, there has been a decline, with the current percentage standing at 38%. This is the continuation of fluctuations that began in April 2023, a two-year low.
Refund of money?
Additionally, starting March 2023, an increasing amount of cash has been used, according to the report. With a 1.6% month-over-month increase and a 4.3% year-over-year increase, this rising trend persisted in September. On the whole, nonetheless, the percentage of cash sales to total sales has decreased 5.8% since September 2022, even if the percentage of cash sales to total sales increased in September 2023 compared to the previous month.
