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Consumer spending rises, says report
There are early signs of cost-of-living pressures showing in credit card payments to balances according to the latest UK Credit Card Market Report for April 2022 from FICO (www.fico.com).

The average monthly spend for consumers hit £760 representing a 10% month-on-month increase, which is typical behaviour in card spend for the time of year, but a small uplift in the average balance for accounts missing one payment suggests inflation is having an impact.

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 one 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 being 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.