New spending analysis of UK card trends by FICO for May 2021,  suggests that some consumers are practising pragmatic financial management, as well as continuing to make use of savings accrued during the pandemic. There are, however, warning signs of the financial pressure growing for those already in debt.

Whilst the effects of a full month of retail and hospitality re-openings were reflected in a further rise in card spend, the increase was just 4 percent compared to the 12 percent increase seen in April. This suggests that consumers foresee future pressure on income with the prospect of furlough support and payment holidays ending.

The percentage of payments to balance continued to increase – by 10 percent month on month. However, an 8 percent year-on-year increase in the average balance for accounts with three missed payments and a growth in the use of cash on cards – 6 percent – will ring warning bells for lenders.

June data will highlight the impact of a full month of the last stage of lockdown prior to the end of the final retail and entertainment restrictions. The ability of issuers to react swiftly and appropriately to sudden changes in their customers’ financial conditions will be tested over the coming months. Those who can detect and act upon the early warning signs accurately with a wide and flexible range of treatments and a robust collections strategy will provide the most benefit to their customers.

The average spend on UK credit cards increased for the third consecutive month, by £26 to £651 in May 2021. However, the monthly increase may not be as high as some might have been expecting for the first full month of the easing of lockdown restrictions, especially compared to the growth seen in April.

Some consumers receiving furlough payments may be showing caution relating to their spending levels, ahead of the planned scaling down of the government contribution as of 1st July. This caution could also be the reason that the percentage of payments to balance continued to increase — by 10 percent month on month to 36 percent, the highest ratio over the last two years.

The percentage of accounts that have missed only one payment increased in May. June’s results will show if there is a segment of consumers where spend in April was unaffordable and so will miss their second payment.

Accounts missing one payment are £25 lower than a year ago. For accounts missing two payments, the average balances are £39 or 2 percent lower year on year, however, this was the peak month during the early stages of the pandemic, so this is not surprising. Average balances on accounts with three missed payments are £221 higher (8 percent) and four missed payments plus are £228 higher (8 percent).

One way to ensure payments aren’t missed is to set up a direct debit, but the percentage of accounts with a direct debit is 2 percent lower than a year ago.

May 2021 also saw the percentage of consumers using cash on their credit cards increase for the second time since September 2020, albeit again marginally. This is being driven by the increased spending opportunities, however, it remains 35 percent lower year on year.

Issuers could look at consumer cash spending patterns. If cash is being used when this was not the case prior to the pandemic, this could be another warning sign of financial stress.