Rising costs drive 10% rise in credit card arrears

19th March 2024

Outstanding debt on credit cards increased by nearly 10% in the past year, as households turned to borrowing to cope with inflationary pressures and rising living costs. according to latest UK Finance date.

The number of credit card transactions rose by 3.8% to 371.4 million in December, with a total spend of £19.2 billion in 2023 was 3.7 per cent higher than December 2022. The data also revealed a 76% year-on-year increase in credit card complaints, with consumers criticising high interest rates and credit limits.

Outstanding balances on credit card accounts have grown by 9.7 per cent over the twelve months to December and 50.1 per cent of outstanding balances incurred interest compared to 50.2 per cent in December 2022.

There were 2.18 billion debit and credit card transactions in the UK in December, 3.7 per cent more than in December 2022. The total spend of £74.9 billion was 0.1 per cent higher than December 2022. Contactless payments accounted for 63 per cent of all credit card and 75 per cent of all debit card transactions.

There were 1.59 billion contactless card transactions in December, 5.1 per cent more than the 1.51 billion in December 2022. The total value of contactless transactions was £27.5 billion in December, a 7.2 per cent increase on £25.7 billion in December 2022.

The number of contactless credit card transactions was 8.8 per cent higher than December 2022. The number of contactless debit card transactions was 4.6 per cent higher than December 2022.

Commenting on the figures,Sam Welch, Commercial Director for Banking at TransUnion said “The latest card spending statistics from UK Finance paint a picture of consumer resilience amidst ongoing economic pressures, as December 2023 saw a 1.4% decrease in debit card spending annually while transaction volumes increased, indicating a level of stability. However, the key takeaway lies in the rise of credit card usage, with transactions increasing by 3.8% year-on-year and a 3.7% rise in total credit card spending. This could suggest a shift towards credit-based purchases as consumers continue to navigate a period of high inflation, as we know from TransUnion’s recent Consumer Pulse research that 46% of UK adults still feel their household income isn’t keeping up with the rate of inflation.

“It’s crucial to emphasise responsible credit management in these circumstances. The data reveals that outstanding credit card balances have grown by 9.7% over the past year, with over half accruing interest. This underscores the importance of financial institutions providing consumers with the tools they need to make informed borrowing decisions. TransUnion remains committed to providing lenders with the information needed to create the most comprehensive financial picture possible – fostering responsible borrowing practices and consumer well-being.”