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Consumers Missing Payments in Summer 2023 Was 20% Higher Than in 2022 Reveals FICO

The average credit card balance has once again increased in July (£1,710) and August (£1,729), reflecting the upward trend seen in the last two years reveals FICO, the analytics company, in its latest report.

The FICO UK Credit Card Market Report for July/August 2023 paints a picture of erratic consumer financial management which could challenge how lenders look after vulnerable customers in the winter months.

Average spend on credit cards over the summer has been relatively flat, albeit still at the highest point since FICO records started in 2006. The average balance has also continued to increase month on month. Both of these factors reflect the general inflationary pressures across the UK economy.

The FICO analysis also illustrates the delicate balancing act cardholders are managing, with the percentage of payments to balance yo-yoing over the last few months following a significant drop in the spring. This can be expected to continue whilst households struggle with the combined burden of higher prices and higher credit card balances.

In fact, the average spend levelled out over the summer months to £825 in July and £830 in August. Nonetheless, they remained significantly higher than the same period in 2022 (£790 and £810, respectively).

The issue of missed payments

The percentage of customers missing one, two and three payments is also significantly higher than the same period in 2022, reflecting the challenges faced by those without a savings cushion to fall back on. Specifically, customers missing two payments was 11.9 per cent higher and for those missing three payments a worrying 20.3 per cent higher.

The initial increase in missed payments began during the Christmas 2022 period and has trended upwards across one, two and three missed payments since. In particular, the average missed payment balance has been increasing since May 2023 for those customers missing one payment and since March 2023 for those with two missed payments.

The erratic pattern of payments continued in August with the number of customers missing one payment down 6.3 per cent after an increase of 5.8 per cent in July. However, the increase seen in July has rolled through to August for those customers now missing two payments.

The other warning flag for lenders is the use of credit cards for cash withdrawals. Recent reports from UK Finance stated that consumers paying for items in cash had risen for the first time in a decade. This increase in cash usage is reflected in the FICO benchmarking figures.

These have shown a steady increase since March 2023 in the percentage of customers using their credit cards to take out cash. In July this was 3.6 per cent and in August, four per cent. However, this is still significantly lower than before COVID, when over six per cent of customers used credit cards to take out cash.

The new data provides important insights for lenders as they prepare for the next wave of winter fuel costs hitting customers’ disposable income.

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