Credit, Collections & Insolvency News
A new report has found that card spending trends for April have indicated early signs of the impact of the widely reported cost-of-living pressures.
Fico’s monthly report based on the largest consortium of UK cards data shows a typical rise in card spend and balances, but also a slight increase in missed payments. Average monthly spend hit £760, tied with December 2021 as the highest in more than two years.
The report shows that average total sales at £760, rose a 10 percent month on month increase, which is typical behaviour in card spend for the time of year
The Average active balance is also rising month on month, again typical for the time of year.
There was no change month on month in percentage of payments to balance, suggesting continued pragmatic management of credit card accounts but there was a small uplift in the average balance for accounts missing 1 payment suggests inflation is having an impact.
Fico says that much of the April data suggests that credit card behaviour is following typical patterns, exhibiting typical post-Christmas spending and repayment trends. The percentage of repayments to balance is flat month on month, suggesting continued financial prudence.
The signs of the cost-of-living crisis are still limited, with the biggest area of concern being a 3 percent increase in the average 1 payment missed balance month over month for new cardholders (less than 12 months). Typically, the higher-risk accounts are more credit hungry, so lenders will want to be vigilant in monitoring this trend.
Fico believes that inflationary impacts will be worst for those already identified as in persistent debt or potentially new candidates for that designation. Populations most vulnerable to inflation include those living on fixed incomes, as well as lower-income households without savings in reserve, especially where wages are increasing more slowly than the cost of living. Lenders are encouraged to perform segmentation analysis on their portfolios, to ensure that their web and mobile applications encourage consumers in distress to make contact at the first indications of difficulty, and to consider establishing special payment plans for those in inflation’s grip.
