Increase in proportion of credit card accounts missing payments

The percentage of credit card accounts missing payments increased by 3.2% in July, according to FICO’s latest UK Credit Market Report.

The analytics software provider revealed that the associated balance on these accounts as a percentage of total balance also increased by 3%.

FICO stated this may have been a reflection of the reduction in furlough support as well as business loans repayment starting during July, while unsustainable post-lockdown spending could also have contributed to the trends.

According to the report, the increase in the percentage of accounts and their balance missing one payment in May has resulted in an uplift in accounts missing three consecutive payments in July – up 19%. July also saw a 7% increase in the percentage of card holders missing one payment, while there was also an increase in average balances on accounts missing one or two payments.

Balances for card holders missing two payments are £215 or 9.5% higher than they were in July 2019.

“The coming months will show if there is a trend emerging and more consumers who were able to maintain minimum payments are facing further financial struggles,” FICO said.

“Lenders will need to continue to monitor these payment trend changes, focussing on reducing payment percentages to balance, especially if balances are being maintained or, more worryingly, increasing.”

The report also showed that the percentage of consumers using cash on their credit cards has also continued to grow – up by 4.2% in July. FICO warned that consumers moving to using cash, with little or no previous cash usage, could be showing signs of “financial issues”.

However, the figure is still well below pre-pandemic levels and with the contactless limit increasing mid-October from £45 to £100, the report suggests that cash usage may not return to the higher levels that were seen pre-pandemic.

“Lenders will need to be vigilant and analyse their data and results rapidly, in the changing economic conditions during the remainder of 2021 and into 2022,” FICO added.

“The full scale of the debt issues should become clear over this period too, so focus will be on the impact on collections as well as preparation for strategic approaches post COVID as issuers decide what their ‘new normal’ is.”

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