Credit card arrears increase

New analytics from Fico has found that the percentage of credit card accounts with one and two months missed payments has increased month-on-month with it appearing that repayments remain a priority for credit card holders, suggesting that there will be greater reliance on credit over the coming months as the cost-of-living crisis deepens due to higher inflation.

The research also found that the average card spend has dropped marginally by just under 2 percent compared to February. There was also a small drop in average active balance – just over half a percent.

While the February data from FICO showed early evidence of cost-of-living pressures, in March another pattern has emerged. The percentage of payments to balance has increased – albeit by a marginal 2 percent. This could suggest that some cardholders are taking a pragmatic approach to managing their card repayments so they can continue to have access to this source of funds as pressure on disposable income increases.

There are, however, clear signs of price pressures impacting finances with a 16 percent month-on-month increase in accounts that are one month in arrears. Accounts two months in arrears are also increasing, by over 6 percent month-on-month.  However, the percentage of accounts with three missed payments has dropped – by over 7 percent month-on-month.

Another signal of falling consumer confidence is the small drop – less than 2 percent – in spend on cards in March 2022.

Remaining vigilant to repayment trends over the next few months will be critical for lenders to ensure vulnerable households are given the support they need.