October sees second consecutive month of a fall in spending

New FICO data has suggested that the tide might be turning on consumer finances with average card spend falling and early missed payment rates rising as furloughs finish

FICO says that though its, analysis of UK card trends for October 2021, says that it appears that with the first signs that lockdown savings — which have appeared to underpin consumer confidence over the last 18 months — may be running out for some. Even though October saw the contactless limit on cards increased to £100, average card spend fell and missed payment rates increased. There was also growth in cash usage, albeit still well below pre-pandemic levels.  However, continuing the confusing picture seen all year, October also saw growth in the percentage of payments to balance.

Against this backdrop, it is even more critical for lenders to focus on identifying behaviour trends to recognise signs of financial stress, particularly as seasonal spending ramped up in November and additional economic pressures may be seen as a result of the Omicron variant, and rises in fuel costs.

The average spend on UK credit cards in October 2021 fell a further £5 to £703. However, this is £55 above pre-pandemic spend levels. Average sales in 2021 have increased 23 percent, compared to a 4.5 percent drop this time last year.

Another sign of financial duress increasing is the percentage of accounts missing payments, which rose marginally in October, and their associated balance as a percentage of total balance, which remained stable. However, the percentage of accounts missing payments is 31 percent lower than two years ago, and the percent of total balance is 18 percent below.

Only average balances on accounts missing two payments increased in October, and is 6.4 percent above two years ago. Consumers with two missed payments were £147 higher than two years ago. Those missing three, four or more payments saw an increase of 14 percent or £352 and 14 percent or £384 respectively.On a more positive note, the percentage of payments to balance increased to another over eight-year high, although the growth rate has slowed. Year-on-year it is 21 percent higher and 28 percent above October 2019.

The rise in full balance payers is driven by accounts opened more than a year, with nearly 60 percent of those with an account opened more than five years paying the full balance. Those opened less than a year started to fall in May 2021, and this has continued into October, potentially a forewarning of financial problems.The percentage of accounts breaching their limit decreased 9.5 percent in October, potentially linked to the continuing drop in average spend, and is 55 percent below October 2019. The average amount being spent above limit increased £2 and is 13 percent higher than two years ago.